While many businesses acknowledge the growing threat of fraud, more can be done to beat this crime – and win customers, writes Keith Wardell, head of commercial strategy for Experian South Africa.
In the current day and age, it is surprising that businesses still hesitate to adopt – and invest – in fraud prevention strategies, mainly due to the perceived costs involved and the perception that these may not yield any real value.
This is a global issue that needs to be examined – and it is important that South African businesses take special caution especially as many have already fallen victim to this crime.
According to a Forrester Consulting study commission by Experian, “Winning in the customer era”, 45% of South African respondents registered an increase in their exposure to fraud. The study, which was undertaken amongst decision-makers within the retail, financial and telco services, showed that only 15% of c-level executives strongly agreed that their organisations had a balanced approach to fraud that did not create unnecessary friction or burden the customer.
Worryingly, the ‘we will deal with it when it happens’ response seems to be a common amongst businesses. According to the International Association of Certified Fraud Examiners, “the majority of institutions are reluctant to develop strict fraud prevention policies because determining the costs and benefits of prevention are almost impossible”.
Many reason that expensive solutions cannot guarantee fraud risk will be eliminated in its entirety, and that funds can be channeled – and used more effectively – elsewhere.
However, the reality is that companies cannot afford to take such a stance. Choosing to ignore fraud can cost businesses irreversible damage.
Experian’s first ever “Global Business Trends Report: Protecting growth ambitions against rising fraud threats”, published in July, takes a forward-looking approach to the current trends around fraud and emphasises the connection between fraud and customer experience.
One of these involves aligning teams – particularly marketing and fraud – and their strategies for the shared goal of combatting fraud while keeping the customer happy.
This approach is becoming ever more important in an increasingly digital world of integrated transactional technologies that allows consumers to access their accounts through the web, mobile, in-store or call centre.
While this offers a world of convenience, it is also a window of opportunity for fraudsters ready to adopt their tactics just as rapidly.
The modern-day fraudster is relentless and determined. They leverage technology and sophisticated underground networks to find loopholes and prey on vulnerabilities. Companies need to be as nimble as fraudsters with access to the right tools and data at the touch of a button.
This is important especially as our global report emphasises catching fraud earlier in the customer engagement lifecycle – from the transaction stage to the account access and maintenance stage. This can dramatically shorten the time-to-detection and reduce the fraud loss rate by up to 60%.
A fine balance between investment for risk and return is critical and the following four points outline how it is achieved:

Growth requires stronger relationships
Business growth involves opening new channels, expanding offerings and extending into new geographies and markets – all these are key to ensuring a positive customer experience. As such, security challenges may create a tug-of-war scenario between the marketing and fraud teams where one team’s goals are counterproductive to the other team’s.
Regular and proactive communication between teams for products are essential. At the same time, it is important to identify a common goal, achievable through collaborative efforts such as sharing information on the customer’s behaviour to improve offer redemption and fraud detection.
A final point on business growth involves gauging how customers interact with your business – fraud detection should be a shared responsibility from the onset of account opening right through to the entire customer transaction process.

Knowing your customer
Fraud teams often have a wealth of data on clients which can benefit the marketing and sales teams.
However, these can be taken further by teams working jointly for example, data exchange by the fraud team can create a better understanding of the customer’s behaviour and subsequently create a more targeted and effective strategy against fraud. Recently, Italy’s flagship airline, Alitalia, selected Experian’s FraudNet service to ensure its online flight ticket purchases are made in a risk-free, unobtrusive manner.
Experian’s anti-fraud platform supports the airline’s fraud detection efforts while ensuring a good service for ‘genuine customers’. This involves analyzing customer behaviour to block fraudsters, and ensuring only legitimate customer are able to purchase flight tickets.

Authenticate, authenticate, authenticate
The less fraudsters know how you recognise your customer, the better. Gleaning insights from data not visible to fraudsters – or even the customers themselves – can be useful to get to know your customer without disrupting their experience with your business. These can be obtained from previous customer interactions across your products, teams and processes and involve collecting data on online behaviour, historical transactions, identity, biometrics and devices that carry the overall goal of authenticating customers and improving the overall experience.
All of these can also help to gain a better understanding of customer behaviour and improve on picking up suspicious activity.
Finally, having a universal view – supported by historical data – helps to recognise a legitimate customer without challenging the customer or revealing your tactics to the fraudster.

Adopting a blended ecosystem
Due to the volume of compromised data and changing fraud schemes, companies are increasingly adopting a blended ecosystem by working with vendors, customers, partners and even competitors to bridge disparate data and internal siloes. This helps to enhance the customer experience to support business growth while still providing a certain degree of protection.
While we’ve long accepted that fraud is something that all businesses are at risk of, it is time that steps are taken to address it, starting with collaboration between teams and implementing systems that will manage key data effectively to authenticate customers and pick up on any suspicious activity – while still improving the overall customer experience and attracting new interest.
It is important that businesses challenge their thinking on fraud and view it is an opportunity for business transformation for the benefit of customers.