How Fraud Prevention Contributes to Minimizing Fraud and Customer Retention

1. Security through legitimization procedures in online payment
2. Intelligent legitimization in e-commerce
3. How can secure payment and customer experience be reconciled?
4. Conclusion: Think about the worst-case scenario already in the selection

Online commerce is booming - more and more people are obtaining goods and services over the Internet. This is not a new realization, but a trend that has been intensifying over the past years.

Order the birthday present for your niece quickly after business hours, place the order for the following day, or apply for a credit online during lunch break - Online is convenient, fast, and easy. For this reason, not only many customers but also more and more merchants attribute increasing importance to this sales channel. However, as online sales increase, so does the number of fraud attempts dramatically. A representative survey by the digital association Bitkom found that more than every fifth online shopper (23 percent) has already been a victim of attempts at fraud online. Well-known scams include non-delivery despite payment in advance, the delivery of counterfeit products, and shopping in fake shops that resemble the actual online shop of the merchants. However, 13 percent of respondents also stated that their payment details were misused after an online purchase.

Personal data are also becoming an increasing focus for fraudsters. Through identity theft, they can apply for financings with banks or make purchases on someone else's account. The victims usually only notice this when they receive a payment request for something they neither ordered nor received. In particular in online commerce with low legitimacy hurdles, it is easy for fraudsters to harm your customers.

Complicated legitimacy procedures and the limitation of means of payment, however, cannot be the solution to this problem, after all, your customers should continue to be able to pay easily and flexibly in your shop. Nevertheless, retailers must protect their customer's data in order to maintain customer loyalty and preserve trust in their own business. But how can this be achieved?

Security through legitimization procedures in online payment

In times of increasing online activities, it is essential for merchants to have reliable payment partners at their side who jointly practice fraud prevention and fraud detection with them. This means that they recognize impending risks of fraud, embezzlement, or asset loss and counteract them with targeted solutions. In many e-commerce areas, one of these solutions can already be standard authentication within the purchasing process.

The best-known standard authentication methods are Post-Ident and Video-Ident. In the case of the Post-Ident procedure, your customers can legitimize themselves in a branch of Deutsche Post AG after completing the online application for financing their desires. This identification is secure since the identity card and the correctness of the data are checked personally. However, it requires your customers to take a separate route and invest time, which also prolongs the processing time and can negatively impact customer experience - they chose your online service for a good reason rather than going to the local shop.

During the Video-Ident procedure, your customers are initially drawn out of the actual payment process to legitimize themselves via a video chat. This intermediate step is also complicated for customers and is often even hindered by technical obstacles, for example, when the camera has to be turned or a specific operating system has to be used. It can be generally said about standard authentication procedures that they are hardly customer-centric and are too complicated and entail a long processing time.

Intelligent legitimization in e-commerce

But there is a solution that combines the customers' desire for fast, convenient identification procedures with the security of their data. In intelligent legitimization procedures, an AI is integrated into the payment solution that takes over the legitimization of the borrowers in the background. It checks whether the purchase is currently being made by a real person. For instance, it determines this by measuring the typing speed of your personal data - this is higher when you enter them manually than when bots transmit them via copy-and-paste. In addition, the AI-supported legitimization solution also uses biometric procedures such as the scan of a fingerprint, face or voice recognition, and classified behavior patterns.

The great advantage of these intelligent legitimacy procedures is the speed and comfort they give to your customers. If all parameters are correct, they receive approvals for their loan requests in a matter of seconds, which provides them with a more pleasant customer experience. Satisfied customers, whose data are secure, are customers who will recommend you and your services. Implementing such procedures is not only an investment in the satisfaction of your customers but also in the existence of your company.

How can secure payment and customer experience be reconciled?

The greatest challenge for online retailers against the backdrop of increasing fraud attempts is to reconcile customer experience with secure payment. A high level of protection which feels cumbersome and lengthy for your customers will result in them experiencing it as a negative experience with your company and as such, avoid future contact. A negative customer experience can thus harm your online shop as much as successful attempts at fraud. Therefore, merchants need payment partners who jointly engage in fraud detection and fraud prevention with them.

They achieve this by providing the retailers with AI-driven legitimation procedures within the payment solutions. The chances for detection of fraud and thus to minimize risk are therefore integrated directly into the payment procedure. As such, these solutions combine high security standards with equally high convenience in the form of simple usage and quick processing. In addition, these mechanisms should constantly be further developed in order to keep up with the changing tricks of fraudsters. You should pay attention to these criteria when looking for a good fraud prevention solution for your company.

For your customers, the measures for secure processing of their transactions and to protect their personal data are not visible, but must nevertheless always be present to ensure their secure shopping in your online shop. To increase this protection, combining different fraud prevention measures is advisable, particularly with payment procedures that are commonly used in high-pricing service segments. This can include the analysis of internal and external data, the recognition of behavior patterns, web scraping technologies, and the identification of fraudulent devices can be used. Financings are also among the areas in which the combination of such measures is particularly important.

A prime example of a secure but convenient financing availment is 'ratenkauf by easyCredit' from TeamBank AG. This provides both merchants and buyers with an innovative, flexible, and media break-free payment solution that simultaneously creates a successful customer experience. It caters to the needs of the buyers as well as retail and has been awarded as the 'Financial Product of the Year 2021'.

Conclusion: Think about the worst-case scenario already in the selection

The relevance of online retail will continue to grow in the future, as will the number of fraud cases. Merchants must take these seriously and actively protect their customers from potential espionage and data theft attempts. The better you achieve this, the stronger customer loyalty will become, because your customers feel safe while shopping. 'For companies, the challenge is not only to protect the customers, but also consumers who would have not become customers. Not least, to save the company's own reputation,' summarizes Erik Scheil, who heads the fraud case management at TeamBank AG. 'One of the most important building blocks is to have reliable payment partners who directly carry out fraud prevention.'

Payment solutions, in which fraud prevention has already been integrated, can best help to combine security and convenience. Thus, merchants should already pay attention during the selection of their payment solution that the providers place value on good fraud prevention in order to protect their customers and their company in case of emergency against attempts at fraud. This signalizes the popular dictum: Better safe than sorry.