How to Choose a Fraud Solution That Delivers Comprehensive Coverage While Enhancing Customer Experience

While safety and security continue to be of paramount importance, businesses are increasingly seeking fraud solution vendors that can power great customer experiences as well.

As the number of large-scale data breaches continues to rise, the scope of modern fraud is increasing significantly. Personal and financial information is not consistently safeguarded, and the ready availability of stolen PII (Personally Identifiable Information) data on the dark web is leading to an alarming upsurge of the first party, third party, and synthetic fraud. Trust and safety are being sabotaged across marketplaces and social platforms as increasing waves of spam, scams, and promo abuse corrode user confidence, and the bot-powered mass registration of fake accounts is wreaking havoc across industries, causing downstream financial loss, brand damage, and customer churn.

Unique Fraud Challenges for Different Industries

Financial institutions are a primary target, as they represent the most direct opportunities for fraudsters to profit from their crimes. However, fraud attacks are wreaking havoc across a wide array of industries, and while attack types may vary, the amount of reputational and financial damage businesses are enduring is sadly uniform. From social networks to food delivery services to airlines, the challenges are the same, and the stakes are equally high.

Application fraud, transaction fraud, fake accounts, account takeovers, and promo abuse are just a few of the fraud types modern businesses have to contend with, and as new technologies continue to emerge, fraudsters continue to evolve their tactics and techniques. Accordingly, organizations across industries are exploring new approaches and solutions, in an attempt to more proactively put up defenses against increasingly sophisticated fraud attacks.

The Combined Importance of Strategy and Technology

Selecting the right vendor with the right solution is a crucial decision for any business doing any kind of transaction online. The right vendor will offer not just the best technology but also the best strategy. Given the speed and scope of modern fraud, more and more organizations are looking to AI and machine learning technologies for their fraud prevention needs. Yet while these technologies do offer more agile and effective approaches for detecting and preventing sophisticated fraud attacks, there’s more to a modern fraud management solution than powerful algorithms.

8 Essential Questions to Ask When Choosing A Fraud Solution Provider

To make the right fraud prevention decisions for your organization, here are some of the questions you’ll want to ask as you audition vendors and solutions:

1. Is the solution adaptive to rapidly evolving and changing fraud trends?
2. How much product support will you require, and how available is the service?
3. Does the vendor follow standard practices to address risk and regulatory compliance?
4. Does the solution offer comprehensive coverage that integrates supervised machine learning, unsupervised machine learning, global intelligence, feature engineering, and rules management capabilities, and more?
5. Does the solution incorporate a decision engine that can guide appropriate responses to signals?
6. Can the system scale to detect and deter massive-scale, bot-powered attacks?
7. Does the solution offer real-time detection?
8. Is the product easy to integrate, intuitive to use, and does it seamlessly facilitate cross-team collaboration?

While this is by no means a comprehensive list, it should hopefully provide a solid overview of the kinds of factors you’ll want to consider as you pursue an advanced fraud solution to protect your business, your data, and your customers.

Essential Features for Comprehensive Fraud Prevention

Something else that’s vital to consider is its usability. AI and ML remain somewhat of a black box for most organizations, so it’s imperative that the solution you choose can segregate detection results into clear fraud scores, and consistently provide easy-to-understand reasons for why a given account or action was flagged. These reasons — often referred to as “human-understandable” — greatly assist investigation teams as they digest results and strive to take appropriate action. The ideal solution will provide comprehensive coverage, high-quality results, and a UI that is both intuitive and interactive.

The Customer Experience Factor

The process of choosing a fraud solution provider takes on an added layer of complexity as you begin to factor in questions around customer experience. While it is certainly possible to increase fraud coverage, you can run the risk of increasing false positives as you do so, and this can lead to poor customer experiences that ultimately hinder growth. Detection quality and total fraud coverage are important, but it’s not ideal if it comes at the expense of customer experience, because good customer growth is essential for modern organizations to drive profit and growth.

Good customer experience matters for many reasons, including:

• It helps promote the growth of the user base, which in turn leads to growth for the company.
• It reduces the churn rate of existing good users.
• It drives new referrals and enhances brand reputation.

Enhancing Customer Experience with AI-Powered Fraud Solutions

Comprehensive fraud coverage and great customer experiences are not mutually exclusive. The right fraud solution will, in fact, enhance customer experience, as opposed to detracting from it or sabotaging it in any fashion.

Many “standard” fraud solution features can be reimagined in ways that can lead to very positive impacts on customer experience. For example, detection scores — a common feature of fraud solutions — are often provided as a simple binary, but instead of scoring with just 0 or 1 (good or bad), why not offer a range of scores from 0 to 1? By providing a range instead of a binary, it becomes possible to set nuanced thresholds for auto-block or manual review. The result is fewer false positives and less friction for customers.

In this way, a sophisticated fraud solution can actively enhance the customer experience. Digging deeper into any scenario based on certain range of fraud scores will significantly increase the likelihood of making the correct decision as to whether or not to allow or block a particular user or action, with the inevitable result being that more customers experience fewer delays.

Search features are another way to advance fraud solution efficacy. Searching for specific suspicious patterns and then acting on them as a whole enables an organization to save time and increase productivity. Unsupervised machine learning can identify clusters of fraud users that share similar suspicious characteristics and patterns, and once confirmed as fraudulent, it’s possible to employ bulk decision actioning to deal with the entire cluster with one action.

Challenges and Solutions for Financial Services and Social Platforms

Financial Services
Financial services providers have to manage a unique array of challenges when it comes to battling fraud. One major difficulty is that compliance requirements make it exceedingly difficult to block customers outright. Because of this, financial organizations have to rely on more aggressive KYC (Know Your Customer) strategies, and ask for more information and details before granting approvals for actions such as new account openings, loan applications, and money transfers.

While procedures such as these can, in theory, serve to increase confidence when it comes to decisions, the reality is that they translate to friction for customers, and the result is often the same as a misplaced block — the loss of a potentially good customer. This is why features such as detection score ranges (as described above) are so valuable — they enable increased confidence and accuracy, without simultaneously increasing friction.

Social Platforms
Social platforms present a different array of challenges. Unlike in the financial services sector, there are no compliance requirements to contend with, so at first look, it would seem easier to manage fraud in this arena — if you suspect fraud, you block it. However, fraudsters who attack social platforms are generally extremely adaptive, and outright blocks rarely hold fast, as fraudsters just adjust their tactics and attack again. Paradoxically, more aggressive prevention strategies can actually produce more fraud, not less.

What’s required instead is an approach that favors tailored decisions. For example, there is a strategy whereby a fraudster can be led to believe their fraudulent content was posted, whereas, in actuality, it is hidden from legitimate users. In this way, platform users are protected from fraudulent and abusive content, while fraudsters are not provoked into launching a new round of more cleverly obfuscated attacks. The result is less overall fraud and overall better customer experiences. These “silent posts” represent a valuable technique for dealing with social platform fraud, but managing fraud at this level of granularity requires a sophisticated solution.

The Importance of Domain Expertise and Industry Experience

Prior experience in a given industry can be exceptionally valuable as well, and should definitely be taken into consideration when searching for an advanced fraud management solution. Modern fraud is so sophisticated, and modern fraudsters so adept and adaptive, that constant change has become the norm when it comes to attack types, techniques, and strategies. This means that one-size-fits-all approaches are no longer viable.

Modern fraud solutions need to be as agile as the fraudsters they protect against, and able to adapt to the unique challenges of any given arena. When researching fraud solution vendors, it’s essential that included in the assessment process is a thorough review of case studies, previous customer success stories, and data reports. The more a vendor knows — and has experience with — the types of fraud unique to a given space, the more likely it is they’ll have the infrastructure, data, and tools to stay ahead of the fraudsters working within that space.

Conclusion

Safety and security continue to be of paramount importance for financial services providers, social platforms, marketplaces, and more, matched only in importance by customer experience. For too long, however, the two have been at odds, with organizations having to sacrifice one in order to achieve progress with the other. This does not have to be the case any longer. Leading fraud solution providers such as DataVisor are now offering AI-powered solutions that enable businesses to deliver friction-free customer experiences while maintaining comprehensive fraud coverage. These solutions don’t just preserve customer experience while addressing fraud — instead, these solutions actually enhance customer experience because of their approach to fraud prevention.