The Center for Data Innovation spoke with Dany Naigeboren, head of analytics for APAC at Forter, a New York City-based company focused on automated, real-time fraud prevention for online merchants. Naigeboren discussed steps retailers can take to stop gift card fraud and the role of AI in automating fraud prevention.
Daniel Castro: How does Forter help retailers prevent fraud?
Dany Naigeboren: At every point along the digital commerce journey, businesses must make a critical decision: Can I trust this customer? Simply put, we work with merchants around the world and across industries to answer this simple question accurately and instantly. Our decisioning blocks fraud, approves more legitimate customers, and optimizes the customer experience.
Castro: How can retailers balance stopping fraud while maintaining a good customer experience?
Naigeboren: Unfortunately, in an effort to curb fraud, many businesses inadvertently deny legitimate customers—this can actually cost merchants 20-30x more than fraud. If you’re stopping fraud at the expense of legitimate sales, you’re driving business for your competitors. The name of the game is stopping fraud and driving revenue. Doing so requires 100 percent automation and deep insights to instantly distinguish a legitimate customer and a fraudster.
It’s more important than ever for companies to deliver superior customer experiences and maximize customer lifetime value. Optimizing the entire customer journey—from pre-purchase to checkout—means merchants can offer a differentiated experience, which consumers will be looking for as they become more conscious of purchasing decisions. By increasing approval rates with more accurate and real-time decisioning, merchants can drive millions of dollars in revenue.
Castro: What should retailers do to reduce gift card fraud?
Naigeboren: In order to understand how to reduce gift card fraud, it’s important for retailers to understand why gift cards are such a hot item for fraudsters in the first place. In the eyes of a scammer, gift cards are like free money. Gift cards are often the start of a chain of fraudulent activity and are attractive because they are anonymous, easy to resell, and don’t require a physical shipping address.
Typically, gift card fraud doesn’t spike until mid-December as last-minute shoppers realize they are running short on time and need a quick gift option. The pinnacle of activity usually occurs on Christmas Eve when gift card purchases are 6-7x higher than on November 1, which puts a lot of pressure on fraud teams.
A lot of the fraud pressure used to just be on gift card-specific merchants. However, in recent years, we have seen a shift of fraudsters targeting merchants who don’t specialize in gift cards, and who may, because of that, be less protected and prepared.
My advice to retailers would be to take a step back and make sure you have a clear picture of gift card sale activity on your website, and that you have the measures in place to make sure your company isn’t at risk. Using automated fraud prevention platforms that provide a clear history of each specific consumer can also help because it ensures that each transaction is legitimate and doesn’t falsely decline real purchases.
Castro: What roles does AI have in providing scalable anti-fraud tools?
Naigeboren: Legacy fraud prevention tools that rely on rules and manual reviews just aren’t built for today’s digital commerce world. Without AI and machine learning technologies, retailers are adding unnecessary friction to the checkout flow. This resistance comes in many forms, such as unnecessary verification steps, lengthy manual reviews, and unwarranted credit card declines. These false declines can really cause damage to retailers, especially when it comes to new customers. New shoppers are 5-7x more likely to be declined by legacy fraud tools than returning customers. As a result, businesses lose out on millions of dollars in lost opportunities and hundreds of millions more in lost lifetime customer value.
With AI, retailers can quickly identify and block fraudsters at critical points along the digital commerce funnel while ensuring legitimate customers can complete their purchases without jumping through hoops. AI is ultimately responsible for how leaders across industries are able to reduce losses, deliver positive customer experiences and ultimately increase revenue.
Castro: How have trends in retail fraud changed during the pandemic?
The pandemic ushered in millions of new online shoppers—and fraudsters have definitely seized that opportunity. In the last two years alone, 46 percent of organizations reported experiencing fraud or other related crimes. And that number is likely to rise.
As far as what fraudsters are looking for? That can shift year-to-year. As we gear up for the holidays, our analytics team has noticed that fraudsters are looking for a few different items:
- Cozy fleeces: Turns out scammers are looking for comfort too, particularly in the mid-price range. These are easy to resell, don’t have as much scrutiny as more expensive brands and have a great ROI.
- Household necessities: Fraudsters prefer generic items and parts because they are easier to resell and people will need them after the holidays are over.
- The newest fashion sneakers: The use of bots to conduct fraudulent activity is extremely common in the footwear industry, making attacks en masse very common.
- Gaming: Consoles and digital goods are a hot item for fraudsters this year and this year fraudsters’ aren’t picky. They’re attacking a pretty even spread, rather than just the most popular option.
- Cell phones: As a relatively high-ticket item that is easy to resell, it’s the golden ticket for fraudsters.
