How to reduce fraud
“Tricks and treachery are the practice of fools, that don’t have brains enough to be honest.” – Benjamin Franklin
There are smart people out there using technology to do some bad things. If they put those abilities towards the power of good, they’d likely do very well for themselves. This is the view of Microsoft’s global fraud expert, Sondra Feinberg, who went on to say, “I think fraud is becoming a bigger problem because fraudsters are getting more sophisticated. They’re very smart. We always say if a fraudster could take what they know and apply it in a legal fashion, they probably would be billionaires!”
Are you aware of the danger?
The biggest danger is complacency. Those not affected by fraud may live in the false belief they are impervious to it. But it’s this attitude that creates the biggest risk, and opportunity, for fraudsters to exploit.
Sondra has heard how this attitude is shaping fraud defence, and not for the better, “The challenge is, generally, people like to stay with what they know. And I’m presenting fraud solutions to various merchants, and they tell me, ‘What we have is good enough’.” But is it?
Do you leave your front door unlocked at night? Likely not. Before you go to bed, you will lock all the doors in your home. And if you have one, you likely activate the alarm. You may even have cameras to record the front of your property. Now, you may never have experienced a break in, or car theft, but you’re well aware it happens, and you don’t wish to take the risk. So you protect yourself with all the means available to you. Protecting your digital operations and business is no different. Yet this inherent danger is not always understood, or appreciated, at the very top. And this poses the greatest risk.
Fraud is a constant battle
Technology helps society in many ways, but it has also enabled fraudsters to become more sophisticated in their attacks. And it seems the more dependent our lives have become on a web of digital engagements, the bigger the target we make of ourselves.
We’re increasingly at risk of business identity theft, chargeback fraud, affiliate fraud, and account theft, by skilled fraudsters armed with the latest technology. These criminals have many ways to break into your business and cause irreparable harm. The direction your business takes on reducing the risk comes from the top, but if they’re not aware of the scale of the problem any solutions posed may only appear as a cost to bear.
On the other hand, the day-to-day analyst is concerned that new technologies give fraudsters an upper hand. So they do all they can within their environment, taking fraud as a cost of doing business. But this is the wrong approach. Turn this around instead and make fraud management an integral part of generating profit.
With the right strategy, fraud teams are turning fraud management from a cost centre into a profit-making centre. No longer does stopping fraud just save money, but with the certainty brought by the right strategy in every online interaction with the customer, businesses can reduce friction and increase revenue.
How you can reduce fraud
The first task is to identify and isolate weaknesses in your defence. And for this, Sondra has some useful advice, “Audit your own systems by shadow testing against other technologies. You don’t have to do anything different, just let those other solutions shadow the processes and then evaluate and act on the information presented.”
This is an approach Sondra has seen organisations taking a proactive approach to fraud management use to good effect. These organisations are typically open to innovation. And open to looking at machine learning rather than relying on a rules-based system that are unlikely to keep pace with the changing techniques used by fraudsters. Part of reducing fraud is in having an open mind to explore the various opportunities for new data inputs.
A lack of bandwidth also plays a role in fraud prevention becoming an active part of business operation. Sondra has seen this first-hand and offers a suggestion, “A lot of merchants say their book is done for the year. That they don’t have enough engineers to work on evaluating fraud prevention tools. We know the struggle. But we do encourage organisations to take advantage of our no cost proof of concept so they can shadow test. Or even run historical data analysis. You don’t have to disrupt the flow; you don’t need an engineer involved and it gives you a good indicator of how your solutions are performing.”
As you develop ways to tackle fraud, criminals find new ways, new technologies, and new approaches to take advantage of weaknesses. To get on the front-foot and counter problems as they evolve means taking a layered approach. When you’re layering your approach, you’re layering your data. Each approach then able to share data. For example, if you have an account creation or account signing on your website, then those risks check should speak to your e-Commerce protection as well. Then those risk checks should speak to your Omni-channel purchases. Things like people returning goods or asking for refunds, voids, employee discounts. If you have data shared between all three of those categories, it improves insight and makes you more likely to stop fraud than if you were working in siloed areas.
How Microsoft is tackling fraud
Microsoft’s fraud solution grew out of a necessity to solve their own challenges of dealing with fraudsters.
As a top-10 global e-Commerce company, they were often under attack. Six years ago Microsoft used a cocktail of third-party fraud technologies to protect from fraudulent activities. It meant keeping pace with changing approaches used by fraudsters was challenging. And so Microsoft developed their own solution, which has been in operation for the last six years. The solution was then commercialised three years ago.
Today its fraud protection solution uses adaptive Artificial Intelligence that continually learns to protect against payment fraud, bots, account takeover, and returns and discounts fraud.
The adaptive and learning element is important because new battlegrounds are springing up all the time. One such relatively new battleground is employee collusion and anomaly detection. “You may think that all your fraudsters are coming from external sources but with COVID and the work from home scenarios, we’re finding more and more employee collusion going on. How you detect those anomalies are coming from your point of sale and things of that nature, is the next frontier.”
The Network effect
Data and Analytics is a prevalent tool in tackling fraud. Because the insight from data can flag where there are gaps in your fraud defence. Sondra calls this The Network effect. “When different pieces of data feed into the same network, use it to look for patterns of fraud within, and identify where fraudsters are laying low, and how to stop them when they come to the forefront.”
But while these fraudsters put their time to unscrupulous activities you need to protect yourself. And for this you need intelligent technology. Technology that learns and evolves from attacks in other organisations and evolves to match the patterns and behaviour of the fraudsters, so it keeps you protected even as they develop new methods to target your business. It’s always worth remembering that better fraud detection – and safer consumer experiences – are a win-win for everyone.
For more information on HSOs Microsoft Fraud Protection Services, click here.