Where prevention is the cure: Understanding online payment fraud

While global digital sales are set to top £4.2 trillion by 2026, behind the scenes online merchants are battling a less positive type of growth: ever-increasing online payment fraud.

The darker side of online payments, global payment fraud is tracking its own acceleration – projected to cost companies (and their customers) £38 billion by 2027.


Fuelled by increasingly sophisticated fraud attacks that leverage point of sale (POS) vulnerabilities exposed by faster payment journeys, merchants are walking a tightrope of balancing effortless customer experiences with robust payment fraud prevention. Without impacting revenue growth.


From multinational merchants to start-up retailers, the challenge is the same: mitigate payment fraud, deliver effortless experiences, and enable revenue growth. Simultaneously.


If that wasn’t challenging enough, doing so against a backdrop of a reported 206,000 web attacks per month is akin to changing the engine of a moving car. So how can online merchants both big and small ensure they’re protecting their customers, themselves – and their revenue?


In the first of our three-part series, we’ll shed some light on what to consider when navigating your online payment fraud prevention strategy.


Assess your process: Reduce the payment fraud opportunity


By the point of sale, a good customer’s journey may be almost complete. But for fraudsters, it’s just getting started. It’s at this moment that the right processes prevail, and the wrong ones fail.


To that extent, assessing all processes and systems that interact with a potential payment transaction – from customer identification and account security to POS authentication, payment review handling and the underlying fraud detection algorithm itself – is not just a sanity check, it’s a strategic imperative.


In doing so, you’ll be better-equipped to identify possible vulnerabilities in the chain of experience; exposing the same weaknesses in your process that fraudulent actors are looking for. What detection parameters are you using at POS? How do you authenticate users? Does your fraud detection system alert you on specific triggers? When and how do you handle fraud-related reviews and queries?


Understanding the mechanics of your payment fraud detection ecosystem reveals where you need to counterbalance. Because it’s not just about preventing fraud – it’s about doing so while delivering a superior customer experience.


Checks & balance: Empowering the customer experience


Customers want effortless experiences with absolute security. For merchants, that creates a crossroads. Deploy stringent fraud detection systems and watch as good customers become frustrated with an overbearing experience and vote with their wallets. Or champion free-flowing, one-and-done payment processes and send an open invite for bad actors. The answer is, quite literally, in the balance.


Pullout quote:


“To combat threats and enhance customer experience, organisations need to redesign customer and internal operations and processes based on a continuous assessment of actual cases of fraud along key customer journeys.”


  • McKinsey: ‘A new approach to fighting fraud while enhancing customer experience’


While each merchant’s fraud detection parameters remain unique to their own risk and persona profiles, such is true of the customers they serve. Balancing fraud detection measures with a seamless customer journey enables a positive customer experience.


But to get there, merchants must be able to effectively calibrate their fraud detection systems and associated processes with painless customer journeys. Get that right and fraud prevention embraces customer retention.



Protecting the protectors: Knowing your payment fraud provider


Fraudulent actors don’t discriminate. Whether you’re a world-leading eCommerce retailer or a start-up online business, they always follow the opportunity. And while you may think you’re covered by general fraud protection solutions at point of sale or from eCommerce platform providers – in reality, that’s just the tip of a reactive iceberg.


For today’s proactive merchants, having a fraud prevention solution that covers the end-to-end payment journey is proving a competitive advantage; delivering trusted payment processes and a superior customer experience. Let alone saving time, money and valuable resources.


By partnering with specialist fraud prevention providers to do just that, whilst leveraging AI and machine learning to access data across wider fraud prevention networks – sharing and enabling more accurate insights – merchants can protect both customers and revenue, with a balanced fraud prevention strategy at its core.


Read part two of our three-part series, and find out how to separate good customers from bad to enhance your customer experience, here.