By Feedzai
Consumers seek a smooth, frictionless user authentication process. Merchants must ensure that online payment methods and transactions are safe from fraud. Feedzai, an AI fraud prevention platform for Acquirers, explains how businesses and merchants can deliver an online payment experience that achieves both.
Security – the right controls at the right time based on the transaction’s risk level – can remove unnecessary hurdles during checkout.
Extra security checks, such as two-factor authentication (2FA), are necessary when buying products from a new website and where the shipping address is different from the billing address on the payment method.
Active authentication methods such as 2FA (user has to input a username and password or code) often receive negative press. A consumer forgetting the password they have set up on 3D Secure with their bank or not receiving the text message containing the code makes it challenging for them to complete their transaction. Passive methods reduce friction and improve convenience for consumers. These methods observe user behaviour on a device, for example, a phone to confirm the user’s identity.
In Europe, where Strong Customer Authentication (SCA) is mandatory, and a joint EBA-ECB report found that SCA is effective in reducing card payment fraud, merchants or their acquirers can actively request Transaction Risk Analysis (TRA) exemptions to 2FA. These exemptions eliminate the need for 2FA on low-risk transactions, streamlining the process for such purchases.
The latest UK Finance Fraud Report revealed that Remote Purchase Fraud (Card Not Present / CNP Fraud) has continued to fall since the UK rolled out SCA, with losses at their lowest level since 2014.
Fraud is omnipresent. Remote Purchase Fraud still represents a significant value of fraud within the UK ecosystem, at £360M. Fraud is also migrating to other channels, such as Card ID Theft, which increased 53% in the last year.
To be a useful fraud prevention measure, 2FA should be combined with other components to create an effective fraud strategy. The balance is the right mix of enhanced security and strong user authentication for a smoother consumer experience in online payments.
