Transaction data can thwart false declines — when everyone shares it
For the past several years, the concept of sharing transaction data between merchants, processors and issuers has been considered a good security measure to curb fraud. But someone has to compile and compare that data in such a way to not only stop fraud, but assure legitimate transactions are not declined.
It has become increasingly important during the COVID-19 pandemic, not only because merchants are desperate to recoup money losses during global shutdowns and not face more fraud or false declines, but also because many new shoppers are coming online for the first time.
At the same time, issuing banks realize many more consumers are unemployed and money is tight — and that heightens suspicion about any transaction that does not match a rule or guideline for approval.
E-commerce fraud prevention provider Forter is addressing this by making its Forter Smart Routing available to clients, delivering more consistent data points to all payment parties to help determine whether a transaction is legitimate or fraudulent.
"The fundamental issue is that even if a merchant approves a purchase, then it goes to the processor and they can decline, or it can go to the acquirer or issuer and they can decline the purchase," said Angela Whiteford, chief marketing officer at Forter.
A legitimate transaction can suddenly become a false decline because each party is making decisions based on data they have at hand and the rules they have in place for denying or accepting that transaction. That data doesn't always match, and once a transaction is declined, the e-commerce merchant can say goodbye to that income — and possibly the customer — for good.
New York-based Forter, which estimates that one in 10 legitimate purchases is being declined because of the lack of data sharing, relies on a global network that includes more than 750 million digital identities it has compiled. That network allows the security firm to quickly examine the identity behind a transaction to determine if the buying behavior is fraudulent or legitimate.
This type of authorization optimization was in the forefront last year, as a key technology in play when Fiserv acquired First Data, as it was developed by First Data's digital commerce team as a way to address fraud and reduce false declines.
Forter wants to keep the technology and its concept of sharing common, accurate data in the forefront now as e-commerce explodes during global stay-at-home mandates.
"You have to have really good fraud protection now," Whiteford said. "With all of these new shoppers coming in, at about 30%, how do you make sure you approve legitimate ones and keep out the fraud? You don't want to decline good buyers just because you don't have rules or buying history in place for them."
Plus, it's like "an obstacle course" to go even further with new shoppers when trying to get the transactions approved by each other party in the payments flow chain, she added.
Forter estimates that false declines, occurring anywhere from the merchant's risk assessment to the payment gateway or acquiring or issuing banks, can cost merchants more than 5% of their revenue annually. To compound that, merchants currently don't have many options to increase approval rates or to recover legitimate transactions that are ultimately declined.
In milliseconds, Forter Smart Routing identifies the best option for approving a transaction by determining which payment method to offer, where to route a transaction, when to apply 3D Secure to meet compliance, and how to recover declines.
"The other parties in a transaction can't look at comparisons behind those transactions," said Galit Shani-Michel, vice president of payments for Forter. "They see transactions that are the same for days in a row, like someone buying three tickets each for the subway with their kids, but they would think it is suspicious and decline if that person brought a friend and bought extra tickets. That transaction could be declined."
With Forter's knowledge of digital identities, the merchant and others would know far more about that consumer to weigh against the different transaction on any given day.
The smart routing service is available for current Forter customers and new prospects to purchase and add to their other network services. Some of Forter's major clients already have it in place.
“Improving our approval ratio is a major focus for us, especially because we have legitimate transactions that are potentially being declined during the payment flow," said Nitish Pandit, senior director of finance at Priceline.
Improving conversion and approval rates enables Priceline to "deliver a better customer experience, which drives repeat business,” Pandit added. “With Forter, we have automated decisions that provide us with the best ways to process each transaction to boost approvals.”
Forter is focused on establishing a clear view of consumers and their digital footprints so as to protect them from card fraud, account takeover and identity theft.
"We don't use rules for transaction screening, we use the power of our network and the identities," Forter's Whiteford said. "In the U.S., we know 97% of everyone who buys online, and it is very easy for us to see a transaction coming through and knowing whether it is legitimate or not."