Why It Takes the Whole Payment Ecosystem to Fight Fraud

Many consumers and small business owners see fraud as an isolated or random problem, but the fact is that e-commerce fraud is an organized global industry that takes many forms. 

In the wake of multiple major breaches of consumer data, there's a robust underground market in stolen identities and card numbers. These are the raw materials fraudsters use to commit crimes ranging from simple online payment fraud to more complex schemes that can combine bots, stolen data, online purchases, account hijacking, and in-store fraud. Fighting criminals who are organized, widespread, and armed with millions of data files requires more than just consumer and merchant awareness. Every player in the e-commerce ecosystem has a role to perform in the fight against fraud, and those roles interlock to make a more resilient, fraud-resistant environment.

Consumers are at the heart of the e-commerce ecosystem, making purchases and driving demand for particular products. They're also at the heart of online fraudsters' business, because stolen data on creditworthy consumers can fuel lucrative schemes. Personal finance experts encourage consumers to monitor their accounts, beware of scams, shop only on secure sites, and report stolen cards and suspicious transactions. But the federal government's page onreporting consumer fraudshows why it's so hard for consumers to fully protect themselves: the list of fraud tactics is very long.

E-commerce merchants are constantly fighting fraud. During peak sales seasons, up to 43% of the orders they get may be fraudulent, according to LexisNexis' 2017 True Cost of Fraud Survey. Blocking those orders requires multiple layers of security measures provided by internal teams, third-party consumer information providers and screening services, and machine learning tools. Merchants also have to guard their clients' data with good internal security practices and careful selection of secure vendors to prevent breaches. When breaches are detected, merchants are responsible for reporting them to law enforcement and affected customers.

The third-party services many merchants rely on to screen orders for fraud or authenticate customers' identities must make sure the data they use to build algorithms and check identities is correct, complete, and continuously updated with client feedback.

Read more at Website Magazine.

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