How to Improve Fraud Prevention Quality through Customer Engagement

By Yang Yu, Assistant Vice President, Delivery, and Nitanshu Upadhyay, Business Solutions Consultant

The impact of fraud on businesses can be significant with companies potentially losing up to $10.5 trillion globally to fraud by 2025. As global eCommerce sales grow to an estimated $8.1 trillion by 2026, companies must have reliable and effective fraud prevention measures in place. How can businesses fight fraud?

Four Ways to Fight Fraud

We believe effective fraud prevention hinges on businesses mastering four specific critical success factors:

Include the voice of the customer in a prevention strategy: By incorporating customer feedback into fraud prevention strategies, businesses can identify areas of weakness and improve their systems accordingly. This can be done through surveys or focus group discussion, where customers can share their experiences with the business’s fraud prevention measures to suggest ways to improve them.
Adopt an AI/risk management engine: AI and risk management engines can detect in real time and prevent fraudulent activity such as an attempt to steal personal information. By using these technologies, businesses can identify and prevent fraudulent activity before it causes any damage such as financial losses and an erosion of customer trust.
Keep human decision-making in the loop during fraud investigation: While AI and risk management engines are effective in detecting fraud, human investigation is still critical to confirm suspicious activity. By having a dedicated team of fraud investigators or fraud analysts, businesses can ensure that all cases are thoroughly investigated and resolved.
Engage with customers in the fight against fraud: By providing clear channels of communication for customers to report suspicious activity, businesses can prevent fraud before it occurs. Those channels range from email to chatbots. Using them, customers can help businesses by reporting suspicious activity and giving feedback on how well a business manages fraud incidents, among other customer service-related issues.

Include The Voice of The Customer in A Prevention Strategy

Fraud prevention begins with customer centricity. Companies that sell digital or physical products, services, and subscriptions to consumer and enterprise customers face the challenge of protecting themselves from fraud while ensuring a satisfied customer experience. However, fighting fraud without introducing friction in the purchase process can be difficult.

By engaging with customers and incorporating their perspectives into the prevention strategy, businesses can improve the quality of their fraud prevention efforts. For example, businesses increasingly use multifactor authentication to combat fraudsters, which can create friction and negatively impact the customer experience. According to studies by Baymard Institute and Zendesk, lengthy and complicated checkout processes can result in customers abandoning their online purchases or switching to competitors. Balancing fraud prevention with business protection is critical, and the fraud prevention strategy influences the direction and guidance provided.

Adopt An AI/Risk Management Engine

To combat the rising levels of fraud and reduce friction in the customer journey, AI/machine learning capabilities ensure a smooth customer experience while implementing risk controls. Merchants must maintain strict fraud controls. Those fraud controls are based on the characteristics of the business, customer type, and investigative methods, but it's critical to consider the customer's perspective. A risk decision engine is built with a machine learning capacity by aggregating the necessary information, consolidating the process, and incorporating risk signals from user behavior and fraud patterns.

Keep Human Decision Making in the Loop during Fraud Investigation

Fraud investigation is a critical part of fraud prevention. Essential components of fraud prevention include verifying the customer’s identity during the payment process and assessing risk through account verification, purchase verification, and identity.

Good prevention protects not only revenue but also protects a business’s reputation. In fraud investigations, complex and unique cases are common to find. Fraud investigation digs deep into any risk event protection tools to detect, investigate, validate, and verify identity and intention to determine if that event can be labeled as a fraudulent act.

Besides technology, there is a need for an experienced and trained team who can detect fraud patterns and suspicious behavior to help fuel AI and machine learning algorithms. Investing in the team to monitor activities and behavior is essential to mitigate fraud attacks. Without human factors, technology cannot evolve.

Engage With Customers in the Fight Against Fraud

Proactively engaging with customers improves the customer experience when it comes to fraud investigation, which in turn protects the brand and builds loyalty, especially when customers are victims of fraud. Effective customer engagement requires the use of tools such as emails, text messages, and outbound calls to not only assist the customer but also protect their interests. In addition, a multicultural and multilingual team that can report incidents quickly is also critical to customer satisfaction and an additional line of defense against fraud. Fraud analysts are encouraged to be actively involved in resolving escalations and customer support to retain the customer. A fraud analyst communicates directly with customers in real time to mitigate risk and ensure that legitimate transactions are protected.

Remember, effective fraud prevention is crucial for businesses to protect themselves from financial loss and reputational damage. By engaging with customers, businesses can not only prevent fraud but also improve the customer experience and build customer loyalty. Centific's fraud prevention services, which combine AI and machine learning with skilled fraud analysts, can help businesses achieve both their fraud prevention and customer engagement goals. Contact us for more information.