The next year will be huge year for fraud and security in retail. Most concern around risk management for the year ahead is focussed on system security and fraud management, which is crucial to today's transactions.
Here are the six key industry developments we can expect to see in the year ahead:
Consumers will contribute to more fraud than identity-theft criminals. Friendly fraud is where a consumer makes an online purchase and then contacts their bank to claim that the transaction was not their doing or that the product was not delivered. This results in a chargeback for a retailer and the consumer gets their product and a refund. It cost the global industry £7.5bn in 2013, compared to £1.7bn lost through identity theft. There will be a similar trend in 2015 unless merchants wake up and address this hidden problem in online retail.
Visa will jump on board to reduce unfair penalties. This means that if a retailer wins a chargeback dispute with a customer, it will not remain as a reputational loss on the retailers record a hugely attractive proposition for online retailers pioneered by MasterCard.
Consumers will end up paying a fee to have their bank file a chargeback in the event they lose a case. Chargebacks are currently weighted in the customers favor, making friendly fraud a costly burden on the retail industry. Requiring consumers to pay a fee for losing a chargeback case would make them more accountable and help level the playing field by discouraging false claims via an equal penalty. Due to the increasing costs that issuing banks experience in processing these disputes, this act of remuneration will provide much needed balance in order to safeguard service levels; ultimately working to reduce cardholder attrition.
The youngest demographic will forge spending growth, driven by growing familiarity with a fast checkout method that is "instant", rather than a longer or more substantial setup process that offers more security or protection. For this reason, we will see a much slower adoption of more secure and cumbersome payment methods, which will compete with convenience for sales conversions. Ultimately the consumer will win out with the option that is most efficient (security widely taking second place to effort and speed).
Retailers will receive greater hands-on help to protect and remedy threats to revenue. Fraud prevention technologies will continue to advance but retailers need to focus on what they do bestselling products and retaining their customer baserather than trying to engage and succeed in an evolving process they dont fully understand. In 2015 we expect Remediation Services to advance from a proactive yet optional tactic to a necessary preventative requirement. Preventative technologies will continue to evolve, giving retailers tools that will not only help prevent the onset of rising fraud, but will also become a vital component in helping maximise profits and achieving ultimate sustainability and growth.
Digital transactions will dominate, increasing the fraud risk. According to the UK Cards Association, debit and credit cards were used for three in every four pounds spent in shops in 2013, while the Centre for Retail Research estimated annual online retail growth of 16%, digital transactions will continue to rise through 2015 as the younger generation of digital natives continue to drive the decline of cash and check usage, which is being phased out in the UK. More online shopping means more transactions to manage and more opportunity for fraud. This fast-changing digital industry will see Dynamic Risk Mitigation take over from older static systems, as we fight to stay ahead of the curve and ensure risk management stays one step ahead of the threat.
Monica Eaton-Cardone is CIO and Co-Founder of Dublin-based Global Risk Technologies