Retailers’ roles in protecting customers from the threat of fraud

By Becci Hinchliffe, specialist in digital finance fraud at Synectics Solutions

With more than half of retail fraud now cyber-enabled, retailers are under pressure to identify any vulnerabilities across their digital payment process and are at significant risk of financial and data fraud in relation to their credit schemes.

E-commerce has been rapidly growing for years and the number of digital payment methods available to consumers has increased in tandem. As the Covid-19 pandemic closed all non-essential bricks-and-mortar shops for months, more consumers than ever before became regular online shoppers and retailers of all types and sizes were forced to create or upgrade online retail capabilities.

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The future development of contactless and frictionless payments continues to gather pace and retail customers share increasing volumes of data to enhance their shopping experience, but this also brings more risk. So, what role do retailers have to play in protecting their customers from the threat of fraud?

Enhance fraud controls without compromising customer journey

 Retailers need to protect customer data to ensure they’re not the gateway for organised crime groups to get to their customers. You may not have enough complete data for the fraudster’s requirements, but even basic information could be used to build the trust of the consumer to encourage them to share more data.

We saw a very high number of data breaches in 2020 and this continues to be a real and significant threat, but retailers can enhance risk-based controls without impacting the customer’s buying journey. Look at what the world of fintech has achieved in recent years – people are able to open a bank account in minutes while still providing sufficient authentication and information in a safe digital environment. It is possible to protect your organisation and customer while making the user experience better for consumers.

Card not present fraud is also a problem, but risk can be reduced by measures such as two-factor authentication like Verified by Visa or ‘in app’ authentication. This is important as issues can arise within apps where a customer feels safe. If they’re not required to re-verify card details, fraudsters can hack accounts from saved payment details.

Take a proactive role in educating customers

 The onus for educating consumers falls predominantly on the banks but retailers could benefit from playing a role in educating people on the potential risks and sharing information about what customers should see as a red flag.

There’s been a sharp increase in phishing in recent months, whereby a target is contacted by email, telephone or text message by someone posing as a legitimate institution, such as a trusted retailer, to lure individuals into providing sensitive data such as personally identifiable information, banking and credit card details, and passwords. Retailers can provide clarity for customers by signposting the things to look out for and be clear around the methods of communication they will use and the fact they would never ask for data in this manner.

For the retail organisation itself, you are more vulnerable to attack when you are making changes, or another IT event happens. Be especially aware if you’re updating your website or if, for example, you experience a high-profile IT failure, this can expose you and your customers to attack. You may also want to warn customers of the threat of duplicated sites of trusted retailers. Being proactive will help to build loyalty and enhance your brand reputation.

Consider collaboration with banks to shine a light on shared challenges

The key to effective fraud prevention is better collaboration, more data sharing and shining a light on shared challenges that may be faced across sectors. As an increasing volume of higher value purchases are made online, the risk also increases. Issues that have previously been the domain of the finance and retail finance sector are now shared with retail.

Retailers and banks could proactively share trends and the products or areas which are being targeted. There is technology that facilitates this. Shared insight and immediate action becomes more powerful and could have a significant impact on reducing fraud and protecting customers.

Becci Hinchliffe is a specialist in digital finance fraud at Synectics Solutions

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