By Simon Fairbairn
The payments ecosystem is locked in a relentless battle against criminals who want to harm businesses and consumers for their own gain. To defend against fraud, the entire ecosystem – from retailers, acquirers and card schemes to technology providers and payment providers – must be invested in the process and work collaboratively.
When done well, the combined effort certainly proves its worth, with £2 out of every £3 of attempted fraud detected and prevented last year, according to a UK Finance report titled Fraud the Facts 2019.
When we talk about the war on fraud, our lens tends to be one dimensional, as we focus on the tactics used to perpetuate fraud, the means to combat it and the increasingly sophisticated technologies we employ to support our defense.
Rarely do we stop and consider the wider balance we must strike in order to deliver on our business ambitions while combating fraud.
If we are really serious about preventing fraud, the only true way to achieve this would be to stop doing business. Of course, that will never happen. Practically speaking, this is a non-starter and something we casually dismiss as being plain nonsense. But if we stop and think about what our fraud prevention practices mean, versus the desired state of retail heaven, then it is clearly a friction that we wouldn't design if we could avoid it.
So, how then do we square the circle when it comes to fraud?
The trick is to strike a balance between delivering a great customer experience while maximizing revenue and, of course, countering fraud. This sounds simple, but in reality, it is where the true battleground lies for the retailer.
For example, if you deliver an amazing customer experience where the customer is always right and nothing is too much trouble, then costs will go up, profits go down, and the opportunity to abuse the system and take advantage grows in potential.
For many retailers, this is simply the daily reality they face, trying to juggle the many, often difficult, choices to deliver the best they can. But truly great organizations are the ones that use each of the variables as a point of differentiation, thinking about how they can take a point of friction and turn it into a value add.
When it comes to fraud prevention, this offers a wealth of opportunities to involve customers, ensuring the pleasure of their retail experience is protected and that the point of trust for payment is safe.
A great example of this is the recent growth in point-to-point encryption (P2PE). On the surface, the name alone can be a turnoff, and the technology and encryption standards employed are complex. Ultimately, what P2PE provides is a means to encrypt and transmit card details so that nothing sensitive is stored on the terminal, and anything that is transmitted is secure.
When it comes to fraud prevention, P2PE works in a seamless, invisible manner to protect sensitive customer data throughout the transaction process, which is a powerful tool. It also takes a lot of the financial and administrative pressure off merchants, which means the technology does not further complicate or disrupt business operations.
While P2PE won't solve all of the challenges that fraud presents, it does provide a great example of how well-designed solutions can be employed in a manner beyond their immediate focus and in a way that is conducive to not just maintaining harmony, but also positively reinforcing it.
Fraud prevention shouldn't have to work alone and against the system. Instead, it needs to be embraced and designed into the system, working collaboratively with partners from across the payments industry to provide better, seamless ways to keep us all protected.
Simon Fairbairn is solution development director Western Europe for Ingenico Group. For more information on how Ingenico is working to prevent fraud in the banks and acquiring space, visit: www.ingenico.co.uk/instore-payments-fraud-report. To reach Simon, please email firstname.lastname@example.org.
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