Let’s take it back for a moment; all the way back to 2010, at the very beginning of the last decade.
At that time, ideas like mobile commerce, BOPUS (“buy online, pick up in store”), and voice-enabled commerce were still just in their infancy, if they even existed at all. Today, though, these ideas are at the forefront, defining the shape of the broader marketplace.
We’ve come a long way in 10 years. The digital payments space looks almost unrecognizable compared to what it once was, and it will only continue evolving from here, with today’s cutting-edge strategies becoming the groundwork for tomorrow’s innovations.
It’s not easy to stay current with such a fast-moving, disruption-prone environment, though. That’s a problem, because innovation that fails to fully-account for the implications of new technologies and processes can be dangerous. Remember: the market evolves fast, but so do the tactics fraudsters employ to exploit it.
Growing Problem for the Digital Market
Just as new developments in the market create opportunities to grow revenue and improve service, they also introduce new challenges. Some of these obstacles may be surging instances of already-identified threats, while others could be new fraud tactics entirely.
With that in mind, let’s examine five developing threat sources which, I anticipate, will prove to be major headaches for merchants in the next few years:
1. BOPUS Fraud
The BOPUS model I mentioned earlier is a big hit with consumers. At the grocery store, for example; people love the convenience of filling their cart via mobile app, then driving by the store to have an employee bring your bags straight to the curb for pickup. That said, many locations don’t require any ID or payment verification to pickup orders. This could lead to fraudsters impersonating cardholders to steal their goods, or even to seemingly-legitimate buyers engaging in “cyber shoplifting,” and filing a chargeback after the fact.
2. Loyalty Program Abuse
Loyalty programs are very popular with consumers, who regard the points they accrue as being equivalent to cash. That’s a problem, though, because many programs through which customers earn points like airline miles or hotel points have lax security relative to financial institutions. This will lead to a surge in loyalty points theft over the next decade.
3. Open Banking Fraud
We’re now starting to see more interoperability between banks and third-parties outside of traditional financial institutions. We’ll see more opportunities coming for data analysis and customization thanks to this new connectivity. We’ll also see heightened fraud risk, with more data floating around than ever before.
4. Subscription Fraud
The recurring billing model entails a certain level of risk by default due to friendly fraud and other potential chargeback triggers. But, with more interest in subscription services, the problem will likely get worse over the next ten years.
5. Travel Company Chaos
Whenever a high-profile travel company goes under, like Thomas Cook or Monarch, we see thousands of chargebacks from confused and upset travelers. These individuals can sometimes “double dip” by filing a chargeback, then getting their money back through insurance bonds. This sets a dangerous precedent going forward, giving consumers the impression they can easily subvert the rules.
The Curse of Convenience
The heightened fraud risk would be bad enough on its own. Unfortunately, it’s not just criminal fraudsters we have to worry about.
We have fast-moving technology, but we lack the ability to leverage it effectively, or to mitigate risk. At the same time, we have a pool of consumers who’ve been trained to expect an ever-increasing standard of ease and convenience, without additional responsibility. The result is a perfect storm effect; a kind of “concierge” mentality that retrains consumer expectations.
Consumers expect payment companies to operate at their convenience, while also providing personalized experiences and strong security. That’s an unrealistic standard, and it doesn’t gel with existing policies and practices.
When institutions bend to this demand, they reinforce that mentality. For instance, a bank may end up resolving a dispute without engaging in proper due diligence. In doing so, they set a precedent, and a new customer expectation. If banks persist in this, the cycle will get worse in the next decade.
Taking the Dynamic View
I want to impress on readers the real threats we will face in the next coming years. At the same time, though, I don’t want to give the impression that it’s all doom and gloom. We will see plenty of positive changes; the growth of small acquirers and third-party institutions will open new avenues to conduct business. It won’t amount to much, though, if we can’t control fraud.
We need to embrace the fact that cyber threats are constantly evolving, and doing so faster than we can respond to the problem. We can’t keep up with new threats, which is why we can’t build out solutions to problems as they come. Instead, we need to take an adaptable and responsive approach.
Fraud isn’t a static massive issue or “thing.” it’s a complex series of interconnected vulnerabilities and threats — and is very dynamic. That’s why the best solution is a multilayered approach.
We should look to historical data and engage in predictive analytics to try and forecast developing threat sources. This will better-position merchants and banks to respond to fraud in a rapid and effective manner. Then, when selecting which tools and tactics to deploy, we should build a strategy based on customization and adaptability.
Even the best-laid plans still have vulnerabilities, and adaptability will ultimately win over a comprehensive, yet rigid plan. Looking into the future is beneficial, but remember to be adaptable to change above all else.
Monica Eaton-Cardone is an entrepreneur and business leader with expertise in technology, e-Commerce, risk relativity and payment-processing solutions. She is COO of Chargebacks911 and CIO of its parent company Global Risk Technologies.
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