GPB: What types of emerging fraud risks are you observing in the Asia-Pacific region given the fast-changing digital payments landscape amid the plethora of e-wallets and digital banking transactions?
Warren Hayashi, President of APAC, Adyen: While payments have become increasingly digital and cashless, it has created a challenge for businesses to keep up with the different and frequently changing techniques used to commit fraud. Singapore alone has seen a 105% surge in scams over the past year.
- A common type is card-not-present fraud. This is when a purchase is made over the telephone or online and fraudsters buy or steal card details on the dark web or via phishing or spyware. Once they have these card numbers, they conduct card testing via small purchases or free subscription sign-ups, to see if the card is approved. They will then make larger purchases or resell the card details of those that work on the dark web.
- Another is triangulation fraud. Typically, the fraudster will act as a merchant, take orders, and then use stolen cardholder data to buy goods from a third party which they’ll ship to the buyer. This type of fraud is often used to buy higher-value items.
- Friendly, or first-party, fraud is another growing problem. These are legitimate transactions that are later disputed, for example when a parent’s card is saved on file in a child’s gaming system – purchases are made, perhaps without the parent being aware, and the parent later refutes them.
Fraud types are constantly evolving and it’s important to understand the types of fraud that exist and how they can affect your business before looking at how to build an effective risk strategy. Businesses must prioritise the establishment of secure systems from the outset to mitigate the impact of fraudulent activities. A flexible and comprehensive approach is imperative for developing robust processes that safeguard our digital environment.
GPB: What steps are needed to secure online payment gateways and how Adyen helps facilitate this process?
Warren Hayashi: Online shopping is all about establishing trust and consistency. First of all, an online payment gateway should hold the appropriate certificates and conform to the measures to protect payment information. These include the Payment Card Industry Data Security Standard (PCI DSS), a set of global security standards to ensure that every company that collects, processes, stores, or transmits cardholder data maintains a secure cardholder data environment. There is also the General Data Protection Regulation (GDPR), which ensures that personal data is only used for purposes for which the customer has consented.
Beyond securing their online payment gateway, merchants need a comprehensive and robust risk management strategy. The cornerstone of a good risk management strategy is data. If you are capturing the right data, you can begin to recognise genuine customers and spot fraudsters by using network-wide insights.
It’s important to recognise that there is no silver bullet to fraud, as every business is different and faces unique risks. Therefore at Adyen, we work with customers to identify their unique risks, and implement solutions like RevenueProtect. This risk management toolkit combines machine learning with customisable risk rules so that businesses can refine and automate risk management that is best suited for their business.
Ultimately, businesses need to find a balance in managing risk, protecting revenue streams, and protecting customers and keeping their trust. As a payments gateway, processor, and acquirer, Adyen provides solutions like authentication, risk management, and authorisation optimisation – all in one platform. This means we can gather data from all processes and make more informed decision-making to help businesses drive more value.
GPB: How can institutions optimise their fraud prevention efforts while also protecting their revenue stream? Also, how can security features augment user experience?
Warren Hayashi: There’s a delicate balance between blocking fraudsters and allowing legitimate customers to pay for digital payments. Unfortunately, a rigid “one-size-fits-all” approach simply doesn’t work. Every business is different and risk management needs to be flexible and real-time. Which is why at Adyen, we believe in leveraging the best-of-breed technology with custom risk rules to detect, prevent, and protect against fraud.
While risk management measures typically add friction in the shopper’s journey to ensure the authenticity of the transaction, risk management can be balanced against customer experience such that the experience for genuine shoppers remains seamless.
- Solutions like Dynamic 3D Secure is an example of this. This gives the business control over which transactions are processed with 3D Secure, and which transactions don’t. For example, if certain transactions are high-risk for the business, merchants can use Dynamic 3D Secure. Otherwise, normal-risk transactions will not go through 3D Secure. That said, 3D Secure will always be applied if this is required by authentication regulations.
- Network tokenisation is another example. This technology enables merchants to replace sensitive 16-digit PAN with unique, non-sensitive tokens, which allows consumers to make future purchases on the business’ website without having to re-enter their payment details, which makes for a smoother customer experience. And because tokens and cryptograms are bound to their requestor, stolen tokens are not valuable to fraudsters.
These security features can augment users’ and businesses’ experiences by providing peace of mind, ensuring that transactions are protected without causing unnecessary friction or inconvenience.
GPB: Please share industry case-studies involving technology implementation projects, which resulted in both the safeguarding of customers’ payment transactions and elevated digital CX.
Warren Hayashi: We have customers coming from a mix of verticals that have seen a reduction of fraud rates and increase in customer satisfaction after deploying our solution.
TrueAlliance (Australia)
TrueAlliance, an Australian retail distributor with 19 global brands, 23 e-commerce sites and 100 brick-and-mortar stores, faced challenges due to siloed legacy payments infrastructure and traditional banking. Recognising these challenges, we worked with TrueAlliance to process payments across all 19 of its world-class brands and retail channels – both in-store and online – taking the guesswork out of fraud mitigation. This not only provided the brand a unified view of payments made across every touchpoint available, but also presented them with ease of access to customers’ preferences and purchase history, resulting in the brand achieving under 0.1% fraud rate and $1.4 million in annual savings.
GetYourGuide (Global)
Grappled with fraud challenges using manual rules, impacting revenue and customer satisfaction during its global expansion, global experiences platform GetYourGuide adopted Adyen’s fraud prevention solution, RevenueProtect, leading to increased acceptance rates, reduced chargeback levels, and 18 times better accuracy in blocking fraudulent transactions. The collaboration prompted GetYourGuide to activate RevenueProtect for all regions by mid-2023.
