The power of unified fraud and payments data to tackle chargebacks and boost approval rates

While there are plenty of fraud management strategies businesses can adopt, the proliferation of data from various sources makes it difficult to discern the true causes behind chargeback and authorization rates without investing significant resources in data reconciliation, and even then the insights can be difficult to discern.

In this article, we explore how adopting a unified platform for payments and fraud can help streamline this process, improving fraud prevention, revenue capture, and customer satisfaction – all while saving time and resources.

Checkout friction is costing businesses more than ever.

Among U.S. consumers surveyed, 66% consider optimized checkout experiences an important buying factor when paying for a product.¹ Whether due to additional authentication, slow fraud checks, or false declines, the cost of friction at checkout is high – experts estimate that poor checkout flow and design causes online retailers to miss out on $260 billion in recoverable sales revenue each year.²

Beyond the immediate loss of individual sales, businesses also risk:

• Financial penalties. If a business is considered “risky” due to high chargeback rates, it can result in penalties from banks.

• Hurting customer retention. In one survey, 42% of consumers said they would never return to a business after a failed payment attempt.³

• Damaging their reputation. Public customer complaints can negatively impact potential and existing customer perceptions.

There may be hidden costs to maintaining separate payments and fraud providers

While it’s still common for businesses to rely on separate providers for fraud management and payment processing, it presents a distinct set of challenges, namely:

• Disjointed data. A less holistic view of data can limit your visibility of the full transaction lifecycle, affecting your ability to identify and respond to fraud effectively.

• A fragmented view of authorization rate root causes.

• We’ve seen leading merchants use top fraud solutions that claim to have 99%+ authorization rates, yet still get penalized by banks for the high chargeback rates. How is this possible? Many fraud-only providers focus on post-issuer authorization fraud checks but have little insight into issuer approval rates and their causes. In other words, they define their authorization rate as the rate of approval after their fraud check and the prior bank check. This leaves businesses with an incomplete picture of their transaction decline rates and the reasons behind them.

• Maintaining multiple integrations. With ecommerce tech stacks sometimes consisting of more than 20 tools, businesses are having to invest an excessive amount of time and money into website infrastructure.⁴

• Challenging issue resolution. When problems arise, enterprises may be caught in the middle as their providers point fingers at one another over high chargebacks or low auth rates. Without unified data, understanding the root causes of issues and getting them resolved can be slow-going and ineffectual.

Machine learning is imperative to obtain unified insights from vast amounts of fraud and payments data

Instead of overburdening staff with reactive investigations, cumbersome rules management, or navigating additional disjointed tools across your tech stack, consider exploring automated, all-in-one solutions that make sense of the data first to then augment human review.

Powered by machine learning and intelligent risk algorithms, these systems improve the ability of enterprises to manage payments and fraud efficiently by:

• Reviewing hundreds of fraud signals instantaneously. They’ll check them against advanced risk models that are constantly improving based on real-time data and trends.

• Providing a unified data analytics platform. They can process vast datasets with multiple variables, enabling businesses to discover correlations and link fraud cases rapidly.

Continuously adapting to evolving fraud tactics. This involves recommending optimizing fraud filters and making real-time, data-informed decisions. By embracing machine learning-based fraud management, businesses can make more accurate decisions about fraud rules and individual transactions to stay ahead of fraudsters – and their competition. Learn how you can leverage these features through a seamless integration with PayPal Braintree.

The difference is in the data

A word of caution: not all AI-based fraud and payments management solutions are created equal! The strength of any machine learning solution lies in the quantity and quality of data used for risk analysis and fraud decision accuracy.

PayPal Braintree is supported by transaction-level insights from PayPal’s vast network encompassing over 400 million active consumers, 35 million enterprises,⁵ 10 billion digital identifiers, and 62 million annual fraud events.⁶ With 97% of buyers recognized by our network and 95% of email addresses already seen in transactions, we have visibility into customer behavior and trends.⁷

This data, processed through machine-learning algorithms, allows us to discern subtle patterns and hidden correlations that a fraud-only provider with a narrower or outdated dataset could potentially miss.

PayPal's unified solution can help you create an optimal system to both catch fraud and boost authorization rates

PayPal Braintree provides merchants with Day 1 optimized processing capabilities that help to maximize approvals, minimize churn, and increase revenue.

At the outset, merchants are equipped with payment optimization tools, driven by powerful data, to provide optimal payment mixes, smart routing, and clean messaging to help boost chances of true “conversion” – that means both checkout conversion and issuer approvals. This in combination with proactive, advanced fraud management means merchants can get an end-to-end view of their payments and fraud through a single provider.

With machine learning-powered Fraud Protection Advanced, PayPal helps safeguard business revenue. Beyond initial fraud detection, PayPal's insight into issuer declines helps enable tailored strategies to boost approvals, minimizing bank penalties for high decline rates. Based on the data gleaned from over a trillion dollars of annual revenue processed through its consumer and merchant lines of business,⁸ it equips enterprises risk scores, filter recommendations, and review tools to make the right risk decisions for their businesses. Or, if a business prefers to outsource their fraud management and shift liability for a wide range of eligible chargebacks to PayPal, they can use Chargeback Protection.

And, because credit card disputes management can be costly reality for mid- and large size business, merchants can also outsource the dispute process to PayPal with Dispute Automation, paying only for the disputes they win. This comprehensive approach helps defend the current transaction and enrich the fraud model for future interactions.

Consider a more unified solution to balancing growth and risk

Maintaining a balance between growth and risk management is essential. Beyond catching fraud and boosting approval rates, a payments and fraud solution powered by unified data helps streamline the entire payments management process, helping provide a cohesive and scalable framework for your business to expand securely.

Contact the PayPal team for a consultation.