One of the most significant shifts in the payments landscape is the digital-first revolution. Digital payments have become pervasive, making financial transactions faster, more secure, more convenient, and more efficient.
During a PaymentsJournal podcast, Erika Dietrich, Vice President, Global Fraud Prevention Risk Services at ACI Worldwide, and John Buzzard, Lead Analyst for Fraud & Security at Javelin Strategy & Research, shared what it means for merchants to adopt a convenience-first approach for payments and the role of 3D Secure.
Leveraging a Hybrid Journey to Create a Seamless Customer Experience
Consumers today continue to seek ways to purchase products, pay their bills, and even obtain banking services through digital methods. These capabilities are continuing to expand into other purchases.
“I recently purchased a car, and the only thing that I did physically in person was drive the car,” Dietrich said.
“The legal agreement, the loan, as well as the insurance and DMV, it was all done over my mobile phone. Everything is becoming very, very digital.”
To keep up in this convenience-first environment, merchants must ensure they are offering the payment methods consumers wish to use—whether that’s Apple Pay, BNPL, or real-time payments.
Additionally, with customers desiring more digital transactions with less physical contact, it is vital that all data is authenticated to verify the identity of the customer.
But with the advent of any new technology, a lot of testing occurs and much remains a work in progress. That’s why it’s crucial that continued improvements are made and customer satisfaction is achieved.
With the growing consumer demand for the newest payment methods, orchestration is a powerful tool to streamline the payment development process. By using orchestration, companies can leverage their current infrastructure, develop new workflows, and create new integrations to support new payment technologies in a more cost-efficient manner.
“One of the things that I find incredibly annoying is what I call the duplication of inconvenience,” Buzzard said. “When you enter an IVR and you enter your date of birth and your social, you’ll eventually find yourself, sometimes during a customer journey, in front of a representative of that company. And then it’s all repeated again.”
“And it might even be repeated to the extent that you as a consumer are wondering, ‘Does this company have their act together?’ It’s important to not just think of seamless client experiences like this platitude or verbal cliche that we can slip into sometimes, but it’s really important.”
Mandates and Their Role in Protecting Digital Consumers
With more payment transactions occurring digitally, an inevitable rise in fraud has followed. 3D Secure offers an extra layer of authentication for debit and credit card transactions. To complete a transaction, a customer is asked to provide proof of identity via a temporary PIN, an SMS code, or a unique password.
“If 3D Secure is not implemented correctly, it can certainly cause cart abandonment if the consumer doesn’t want to go through the friction process,” Dietrich said.
“It is important that merchants are adopting and utilizing sophisticated tools such as your behavioral components, your device components, your geographic location, IP address to collect that information to ensure that the consumer doesn’t have friction, doesn’t have to put their password in because all of that compelling information reduce the friction for that end user.”
Although 3D Secure plays a vital role in protecting online transactions, Dietrich noted that 3D Secure is not so much about detecting and preventing fraud but about inputting qualifying data points to enable a fast approval process. With banks adopting new APIs to collect this qualifying information from the merchant and the consumer, the issuer and the acquirer have full confidence that the customer is who they claim to be.
As technology moves forward, the implementation and adoption of these solutions by businesses will become table stakes.
“It’s just the way that business must be done now to create that ultimate experience that keeps people coming back,” Buzzard said. “Sometimes people say a cult-like movement to use or patronize business. This is part of it. You can’t lock the door on good customers. The whole focus is to keep the bad guys out and let the good guys in.”
Hybridized Experiences Require a Consistent Digital Identification Platform
With merchants setting their sights on expanding their customer base and boosting revenue by taking their online business globally, they will need to accurately determine the digital identity of the consumer. They must also ensure that the data has been evaluated in real-time, using various fraud prevention tools. Some of these tools can include Behavioral Analytics, Device ID, authentication tools, soft credit checks, and machine learning.
Doing so will help merchants protect themselves from common fraudulent acts, including those that may occur when new accounts are open or through account takeovers.
Although there are various solutions for verification being deployed in the United States, these current systems have a long way to go to make the process more efficient.
“I had a different way to authenticate and verify who I was with my insurance company,” Dietrich said. “I had a different method for the loan agency and a different method for the DMV. Now myself, as a consumer, I went through three different authentication and verification processes for those different platforms through those providers. One was voice, one was a PIN, and one was my biometrics, my face.
“Going through that experience, it would be ideal if there was an easier or more consistent way that this was done across all of those platforms. But that utopian society may not occur for us anytime soon, but let’s see what our future holds for us.”
Buzzard believes that when it comes to mandates and execution, it could be too little, too late.
“The parade just kind of passed us by, by the time you meet a mandate,” he said. “Technologists have to take a really big paintbrush and dream a little further out to kind of encompass what’s going to happen because it worries me when we just keep meeting the minimum without thinking about what else is happening in the world.”
“Things that are happening outside of the United States will eventually come here. We’re rather slow in the adoption process, but as we see other things happening, we’re going to get both those problems and great solutions mixed together.”
As consumers increasingly embrace and adopt digital payments, merchants must be keen to provide the methods they prefer to ensure consumers have plenty of choices, thereby building trust and brand loyalty.
As the expansive digital payment landscape grows, bad actors are always on the lookout for the weakest link and how to profit from these blind spots. Although government mandates have been indicated to protect merchants and consumers from the latest fraud attacks, that’s simply not enough. Attacks are increasingly more sophisticated, leveraging the latest technology. Merchants must also balance the importance of ensuring that genuine customers enjoy a seamless experience. This requires a solution that can verify a transaction in milliseconds. It’s all about striking a balance.
Even then, consumers will still need to be authenticated before purchases are approved. However, that authentication must not give way to friction. It is a delicate balance, and only time will tell how the payments industry will navigate the tricky waters of authentication and fraud prevention. ACI’s fraud management solution uses digital identity services and leverages behavioral attitudes, as well as AI features to offering a 360-degree panorama, using its analytics platform.
Fraud prevention is not just about protecting consumers in this ever-complex landscape, but it gives merchants the opportunity to capitalize without losing on returning consumers. As merchants enter different realms of businesses and go beyond borders to attain new customers, their fraud solution should compliment their business activities. A solution which is agnostic of a consumers preferred payment method, region, channel, and understands the power of data orchestration and leverages AI to detect, decide, and deliver—in real-time.