Leveraging Data to Fight Fraud and Enhance Customer Experience
For issuers and FinTechs trying to find the right balance between reducing fraud rates and delivering a great personalised customer experience, real-time data-based approaches to fighting fraud are crucial.
When a customer experiences more than three declines on a card, they are 2.5 times less likely to use that card again, resulting in a 12% net reduction in potential payment volume for the issuer1.
To help reduce the possibility of false declines and customer frustration, issuers and merchants alike are turning to data and insights from Artificial Intelligence (AI) and Machine Learning-data models. Then incorporated into the buyer journey, this data-led approach reduces unnecessary checkout friction, enhances real-time decisioning and optimises the customer experience.
To illustrate the impact in real terms, Mike Isler, Chief Revenue Officer for Visa’s Value-Added Services, outlined a possible example.
“Let’s say we have a young entrepreneur whose business has just achieved profitability. She’s finally starting to see money coming in and wants to celebrate her success with a larger-than-usual retail purchase. If her bank is using traditional guardrails around risk management, it would likely decline the transaction as it is clearly outside her usual purchase patterns. Her celebratory purchase is then dampened not only by the decline, but by the frustration of being forced to use another payment method to complete the purchase.”
“But,” he continued, “if her bank is using the latest AI models and insights, their smarter data analytics easily account for her change in income and approve the transaction, not only avoiding a false decline and fraud trigger, but helping to preserve a delightful customer checkout experience.”
Similarly, a multi-national issuer with significant presence in the Middle East is already seeing the potential benefits of proactive fraud management. By using more flexible and customised rules to identify and manage potential risks, the issuer saw a 94% increase in approval rates, prevented an additional $500,000 in fraud losses and increased approvals of “good” transactions by $2.5 million2. These results help illustrate how flexible rules management and AI-based data systems allow the ecosystem to continually improve, helping to better manage risks and tailor the checkout experience.
Issuers now have an opportunity to redefine the future vision of anti-fraud strategy through a data-driven, intelligent security approach.
Implementing an intelligent security approach requires an issuer to reassess its current capabilities and requires data orchestration across sellers, marketplaces and issuers—with benefits across the board:
- Merchants can improve customer experience through a more seamless, secure checkout, while reducing false declines and improving fraud detection rates
- Customers maintain trust in the issuer’s ability to meet their financial needs, ensuring top-of-wallet status for issuer cards during the shopping experience
- Issuers can help reduce fraud through advanced decisioning and rules management in real time, supporting a more seamless purchase experience with merchants
Data is at the heart of implementing the intelligent security approach that unlocks an elevated customer journey.
To harness the full power of data, it is critical to:
- Capture transaction data at all relevant touch points to ensure that risk and fraud reduction efforts are tied to customer experience performance benchmarks or Key Performance Indicators
- Make processes smart to improve data intelligence, leveraging machine-learning to continuously learn from every interaction and adapting to new evolving threats across the customer journey
- Adapt the right security tools to enhance data gathering so an issuer can use data signals from the merchant when making an authorisation decision
Whilst the above is an excellent way to start redesigning your fraud and risk mitigation strategy through data, this alone cannot achieve your future vision. Success depends on the right ecosystem partners and suppliers who can support and amplify your vision as an Issuer or a FinTech. Be sure to have these in place prior to embarking on your journey toward a data-driven, intelligent, payment security approach.
For more information: Risk Solutions for Issuers | Visa
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1 VisaNet data in India from Jun ’21 to Nov ’22. Decline Impact Analysis: Pre-Period: Rolling 3-month period between Jun ’21 to May ’22: Analysis Period: Rolling 1-month after Pre-period: Post Period: Rolling 3-months after Analysis period. Eligible Cards: Consumer Credit Cards having one approved transaction in Pre-period and greater than six months on book are considered eligible cards
2 Leveraging Fraud Data to Fight Fraud: Intelligent payment security approach for FinTech issuers. March 2023. Rules were optimised over 2 months. The false positive ratio reduced from 48.81:1 to 2.83:1