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How to Fight Fraud and Provide a Frictionless Customer Experience

Tim Prugar | Nov 9, 2017 96 views No Comments

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With studies showing that most consumers are willing to pay more for a better customer experience, there’s been an arms race to create the most “frictionless” or “seamless” experiences possible.

Brands like Amazon, who started featuring the “one click” purchase button, are focusing on meeting customers on the channels they frequent and making it almost effortless to conduct business with them. However, whatever customers can do, fraudsters will do.



Herein lies the problem: how do you remove CX barriers without letting the bad actors slip through? This is the million dollar question, rather, the $1.6Trillion question as that is the estimated cost of U.S. customers switching due to poor experiences.

A False Dichotomy
While CX teams are rooted in the philosophy of providing effortless experiences, fraud & security teams have their own version of customer experience, one built on trust and reliability rather than speed and ease.

Often times security and fraud teams create intentional friction to provide deterrence for fraudsters or buy time to make sure the customer is who they say they are. While this is meant to stop criminals and protect customers, it has also pitted these two groups against one another under the false assumption that you must choose one — CX or Security.

That’s simply not the case.

The Authentication Solution
Brands that focus on fraud prevention, or catching the bad guys, tend to view every customer as a criminal. This leads to an increase in friction filled experiences and a high amount of false positives or false declines where legitimate transactions are rejected.

In 2016 alone, false declines led to an $8.6 billion loss for US e-commerce merchants. These false positives not only undermine the ability to effectively combat fraud, but when you consider that 70% of buying experiences are based on how the customer feels, they’re also harming CX as well.

That’s not to say that you shouldn’t have any false positives as that would be an indicator that you’re letting a significant amount of fraud through. This is where authentication comes in.

Brands that focus on authentication, using a layered approach where you have numerous opportunities to demonstrate your identity — out of wallet knowledge based authentication questions, PINs, ANI Matching, etc. — do it right. Authentication-focused brands are able to execute seamlessly in near-real time, and those who get the higher friction experience are either fraudsters or people who understand they were not able to be authenticated.

Over 15% of all cardholders have experienced a transaction that was falsely declined, leading to a total amount of $118 billion or more. If a merchant chooses to loosen front-end fraud filters, false positives can lead to costly revenue losses and customer satisfaction. Decreasing false positives with the correct authentication solutions will in turn increase revenues and recover as much as 80% of what was lost in chargebacks.

The Opportunity
In 2018, only 50% of organizations are projected to implement significant business model changes in efforts to improve customer experience. The companies that do will grow revenues 4-8% above the market. When CX is prioritized, the results are astounding.

Forrester estimates that a $1 investment in CX yields a $100 return. Not only can a multilayer authentication process help stop criminals and protect valued customers, but it’ll also enable you to profit on a CX filled with speed & ease AND trust & reliability.

There’s simply no reason that we should feel like we have to choose between an excellent customer experience and stellar security today. With cyberattacks happening at double the rate, and the Equifax breach creating what’s sure to be an even more fraud-filled holiday season, there’s never been a more important time to get this right.

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