Payments, identity verification, fraud scoring, delivery partners and customer service tools all form part of a complex technology ecosystem when it comes to fighting merchant fraud. While these partnerships enable speed and scale, they also introduce significant third-party risk. Anti-fraud leaders attending the Fraud Prevention Summit are increasingly focused on strengthening governance across this extended network of vendors…
The expanding risk surface
Retailers typically rely on multiple external providers to manage payments, authentication, fraud detection and data processing. Payment service providers (PSPs), risk scoring platforms, identity verification tools and logistics partners all interact with sensitive customer and transaction data.
Each integration creates potential vulnerabilities. Weak security practices, poor data governance or inconsistent compliance standards among vendors can expose retailers to fraud, regulatory breaches or reputational damage.
For omnichannel businesses, the risk is amplified by the need to synchronise online and in-store systems. A gap in controls between channels can be quickly exploited by fraudsters.
Strengthening vendor due diligence
Retail fraud teams are increasingly working alongside procurement, IT security and compliance functions to implement stronger vendor evaluation processes. Best practice now includes:
- Detailed security and compliance assessments before onboarding
- Verification of regulatory certifications and audit standards
- Data protection impact assessments (DPIAs) for vendors handling personal data
- Clear contractual responsibilities for fraud monitoring and breach reporting
For retailers operating internationally, this process must also consider cross-border data transfer requirements and regional regulatory frameworks.
Continuous monitoring, not just onboarding
Vendor risk management cannot stop once contracts are signed. Leading retailers are implementing ongoing monitoring programmes to ensure partners maintain the standards agreed at onboarding.
Regular security reviews, performance monitoring and compliance audits help detect issues early. Some retailers are also using centralised risk dashboards to track vendor exposure across their technology stack. This approach ensures fraud prevention tools themselves do not become weak points in the ecosystem.
Collaboration across the ecosystem
Effective third-party risk management also requires collaboration. Fraud patterns evolve rapidly, and information sharing between merchants and vendors can help identify emerging threats faster. Retailers increasingly expect partners to contribute to proactive fraud intelligence and rapid response protocols.
Governance as a strategic capability
For omnichannel retailers, managing vendor risk is now a core component of fraud strategy. Strong governance not only reduces exposure but also builds trust with regulators and customers. In a highly interconnected retail environment, protecting the ecosystem is just as important as protecting the transaction itself.
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