The last two years have been a phenomenal ride for digital payments. They have become ubiquitous, almost a sign of our times. And the remarkable changes they have ushered in, there seems to be no going back now. But this growth has come at a cost – in the form of more sophisticated fraud. In 2021, over USD 20 billion was lost to online payment threats worldwide. E-commerce card fraud now accounts for two-third of all card fraud in the UK. Meanwhile, two out of three e-commerce companies in Germany saw a sharp rise in fraud last year.
Over 85% of online sellers in Switzerland were victims of fraud. Such developments have kept authorities and merchants on their toes and many efforts are on to protect users and their data. The pandemic has spurred consumers’ desire for greater safety. Payment habits across Europe are changing and fraud influences this further. For example, users in the UK and Germany feel the need for more secure payments. Many Spanish shoppers are averse to buying through social media platforms because of low trust. Fraud is expensive – not just for businesses, but for everyone. CMSPI estimates that European merchants spent nearly €7 billion on fraud prevention in 2021. Add to this the long-term damage to brand image and lost buyer trust. They erode revenue and growth potential, making you lose customers and market share.
What has changed in Europe?
Since the outbreak of the pandemic, businesses worldwide have had to adapt and reinvent themselves to survive. This translates not only to how they run their business, but also how they accept payments. As with rest of the world, Europe also swiftly moved to online payments. As stores closed, online and MOTO (Mail Order Telephone Order) payments surged, leading merchants to scramble to build the capability. Whether this meant building a website, advertising and selling via social media, or accepting online payments. No more relying on store footfalls and cash payments alone.
Card usage across Europe is going up, along digital wallets, account-to-account transfers, or services like BNPL. Contactless payments have become more popular than ever. So have mobile commerce and mobile payments, as smartphone use booms. Now even retailers have started using mobile phones to accept payments, making the smartphone a payment hub in itself. Such massive behavioural shifts will continue to influence the payments landscape in Europe.
Rising payment threats
Identity theft, data breaches, ransomware attacks – such terms have grabbed headlines worldwide, raising much alarm and fear. The pandemic and its accompanying changes have dramatically increased the threat surface. Criminals and fraud actors are getting more sophisticated, leading to a spike in attacks. According to the Harvard Business Review, there was an estimated 150% increase in ransomware attacks through 2020 and 2021, and continues in an upward trend.
What should you do as a brand to avoid payment threats?
As a business owner, you have to be more conscious than ever about rising threat attacks. Educate yourself and adopt the best fraud prevention you can. It would of course depend on the size, complexity, and needs of your business. But it is critical to have the right infrastructure in place. Rights tools, right tech, right processes, right policies – all need to be driven top-down in the organization. It has to become a part of your company culture, with the management leading from the front. Develop the philosophy and best practices. In today’s time, the risk of data breaches and fraud is at an all-time high. Brands that focus on the privacy of their customers will have a distinct competitive advantage over others. Adopt a privacy by design philosophy. Keep data privacy at the heart of your technology and processes. Take privacy very seriously, and apply it at all levels within the organization to assure stakeholders.
1. Improve fraud detection through a continuous feedback loop
Use a mix of people and AI to enhance your ability to detect threats and take appropriate action. AI risk management systems can help you monitor and analyze payment data in real time. This helps you efficiently prevent payment threats. Such systems improve your team’s efficiency, reduces cost, and helps you manage fraud effectively. Ensure your risk management strategy is balanced. You don’t want to add more friction and detract from a faster checkout experience. Use biometrics for payment authentication and tokenize all payments data. Modernize your payment systems and use the most updated tools like 3D Secure v2.3.
2. Gather data, but respect privacy
To enhance your fraud prevention, you require to collect data. Hence, be judicious in collecting customer data. Communicate with users, seek their permission before collecting data, and give them the option to opt-out if they wish. Follow all local laws and protocols. Earn and keep the trust of customers by educating them regularly about fraud and fraud best practices and how to practice safe online shopping and browsing behaviour. Communicate changes regularly to clients. Involve them in the process – keep them updated on changes in company policy, industry regulation, etc. to help them make more informed decisions. Always take feedback.
3. Forge strong partnerships
Choosing the right partner is crucial to your risk management strategy. They can offer you the right tools and advice for your business, along with bespoke solutions that can be enabled or disabled as per your needs. Look for a payments partner who uses advanced fraud prevention tools to fight payment threats. These could include AI and machine learning, advanced analytics, biometrics, etc. Added features such as risk profiling and automated chargeback management are extra bonuses.
Opting for a one-stop solution or service provider is simpler. It is easier to maintain a single contract, and work with a partner who can give you pan-European (and global) reach and support.
How can Novalnet Help?
As a global PSP, Novalnet can help you build the best risk management strategy to match your business needs. We have decades of experience in helping Europe’s leading brands process their payments. Our AI-based risk management solutions and advanced analytics help you securely process payments in a PCI DSS-compliant environment. Wherever you are in Europe, we ensure that your payments are processed in a secure, stable, and scalable way.
Reach out to us today to know more.
Gowri Shankar is the IT Application Security Manager at Novalnet with versatile knowledge in Programming and System/Security architecture. Having 11+ years of experience in the financial services industry, Cybersecurity, Payment Card Industry Data Security Standard (PCI DSS). Certified in Advanced Payment Card Industry Security Implementer (CPISI 2.0), Secure Software Lifecycle Professional (CSSLP) from (ISC)².