How to reduce fraud without increasing friction

Online payments are attractive targets for fraudsters. Digital channels now account for 52% of overall fraud losses,¹ surpassing physical fraud. Every interaction between a business and a customer poses a potential fraud risk, from account creation to purchase. And even once a sale is completed if customers dispute charges.

Businesses can manage fraud without impacting checkout speed or customer satisfaction. The right tools can help you to increase authorisation rates, reduce costs, and decrease fraud. PayPal has solutions that can help your business to guard against fraud whilst powering growth. Throughout the transaction lifecycle. All in a single platform.

The high costs of fraud

Fraud incidents can affect a business in many ways.

• Reputational costs. A single bad experience may turn a good customer away forever. And potential new customers may be put off by unfavourable reviews or word of mouth and decide to shop elsewhere.
• Penalties and disruptions. If a business experiences fraud regularly, a card network may label it as a risky business and impose penalties. A payment service provider (PSP) may also refuse to process its transactions.

• Wasted resources. The time and money spent fighting fraud are resources diverted from growing the business and pulling ahead of the competition.

Be open to business. But closed to fraudsters.

A growth-friendly fraud prevention framework can help your business to manage fraud. And maintain efficient payment processes that can help you to scale your business. Here are some tips to consider:

Choose a PSP with the right fraud management tools

A PSP with global fraud management tools like PayPal can help your business to combat bad actors both offline and online. These tools work together to flag fraudulent transactions and help to minimise the impact on good customers’ shopping experiences.

Layer fraud solutions

Multi-layered fraud solutions can help your business to identify and protect against fraud throughout the transaction lifecycle. Investing in multi-layered solutions that are integrated with cybersecurity and online customer service operations can help your business to sustain lower fraud losses.

Leverage AI-powered fraud prevention tools

Fraudsters are embracing artificial intelligence (AI) to evolve and expand. But AI and machine learning (ML) tools can also help your business to fight fraud. These tools can adapt to detect fraud patterns in real time and profile ever-changing purchase patterns. And they can increase the authorisation rates of good customers.

Optimise authentication

The authentication process has evolved beyond 1-time password requests. Consider implementing new tools that can help you to keep your business’s information safe and updated:

• Account updater tools can securely handle and automatically update sensitive card information

• Network tokenisation replaces a customer’s debit or credit card account number with a business-specific token that generates a secure, single-use cryptogram for each transaction

• Compliance tools such as 3D Secure (3DS) can help your business to comply with regulations for secure online transactions

Implement dynamic routing systems

Use a dynamic routing strategy to route payments across different payment processors. This can help your business to identify and protect against fraudulent transactions in real time.

Reduce chargebacks and automate chargeback management

The largest chargeback management challenges that merchants face are recovering revenue from incorrectly filed chargeback cases and reducing overall chargeback rates.² Consider working with a PSP that offers a chargeback protection service to reduce chargebacks before they occur. And tools to automate the dispute resolution process.

PayPal fraud management case study: Kiva

After integrating PayPal Fraud Protection Advanced,³ non-profit Kiva reduced its transaction review rate by 200%.⁴ Before integration, Kiva had been manually reviewing thousands of transactions every month. Including many false positives.

“Thanks to the effectiveness of PayPal’s FPA solution, we feel more confident in the task of detecting and declining transactions. This solution analyses a multitude of data points in addition to employing a machine learning model. This technology enables a more efficient and accurate analysis, ultimately enhancing our decision-making process.”

— Zazil Ortega, Senior Manager, Credit Operations, Kiva