Conversion Rate Efficacy and Fraud Reduction

Part 1

August 18, 2021

Merchants have two important objectives to achieve simultaneously: reduce fraud while raising conversion rates.

Fraud’s impacts are further reaching than the obvious loss of goods and chargeback fees. Merchants are at risk in the form of penalties, wasted shipping costs and time lost resolving disputes.

Research shows that for each dollar of fraud merchants are paying $2.40 when considering additional factors. Persistent fraud also means that merchants become ‘risky’ and subject to higher transaction fees and threat of losing their merchant accounts altogether. The large ding to any business’ reputation spells lost consumer confidence, less revenue, and fewer loyal customers.

As an overcorrection, many merchants end up building fraud prevention systems on par with Fort Knox, often placing genuine shoppers in the same bracket as fraudsters. Shoppers, ultimately displeased with the level of service, abandon purchases if hit with false positive fraud flags.

Strike a Balance

False flags significantly impact conversion rates and profits –undermining merchant revenue and increasing the likelihood of overzealous fraud prevention systems.

The goal, therefore, is to strike a balance that enables merchants to minimize fraud while maximizing conversion rates, ultimately limiting losses on both fronts. This article and the series to follow, focus on fraud prevention and merchant tools that effectively filter incidences of fraud without constricting checkout conversion rates.

Making Use of Big Data

Before identifying solutions, merchants require a clear understanding of what their fraud looks like, what trends needs to be assessed, and how genuine transactions compare to fraudulent ones. The best starting point? Big data. The sheer volume of data at a merchant’s disposal provides clear trends on fraudster and consumer behavior. This context is key for fraud management since established patterns of behavior lend themselves to the development of effective strategies and tools.

Hundreds of thousands of transaction points help combat fraud by offering data driven solutions. Both payment providers and merchants need the tools to collect and collate these data points into actionable trend analyses.

While data can help merchants map out patterns prevalent among a consumer base, cultivating an understanding of fraud trends across market segments and geographies are what factor into the effective use of said information.

This is achieved through near constant updates of fraud management systems: according to ACI’s Insight Paper: Driving Up Conversion with Effective Fraud Management both internal and external sources— including hot card files, chargeback data and information traded on the dark web—can work towards these systems.

Fraud exchange services also serves as a valuable channel through “connecting merchants and issuers in a multi-directional information exchange that boosts the ability of all parties to make accurate and informed decisions.”

The more useful the data, the richer and more accurate it becomes in the fight against fraud. Detection strategies play a huge role in reducing the impact of false flags and facilitating genuine and seamless customer checkout processes.

Check back for the latest in money market and fraud mitigation and consider partnering with Alto Global Processing today! Our Alto Shield service monitors your business’ checkout process for fraudulent activity, offering peace of mind and real-time protection. Consider partnering with us to combat fraud while increasing conversion rates.

Share your fraud management tips on our LinkedIn page.

SMEs: Analyzing 2023 And What to Expect in 2024

SMEs: Analyzing 2023 and what to expect in 2024 January 3, 2024 We start 2024 reflecting back on the last year and looking forward to ...
Read More →

Mobile Payments: Will They Dominate The Market?

The idea of a comprehensive digital ID looks like the solution, but there’s much work to do in regards to implementing it. Such as which ...
Read More →

The Future is Phygital

The Future is Phygital December 20, 2023 As with many other aspects of life, the COVID-19 pandemic affected the payments landscape in terms of the ...
Read More →
Scroll to Top