Retailers need a robust tech strategy to confront the rising cost of fraud.

Digital technology has brought a relentless wave of innovation, making it easier for customers all over the world to purchase what they want with a variety of payment methods – from credit cards to mobile wallets and even cryptocurrencies such as Bitcoin. While these innovations bring welcome convenience for the consumer and broaden the market for retailers, they have also driven sharp increases in the volume of fraudulent transactions merchants and issuers are subject to.

Retail fraud is a growing issue for merchants, who are increasingly looking for solutions that will help them deal with the problem in the long-term
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As more consumers opt to do their shopping online, accurately tracking purchases, verifying identity, and matching transaction data to customer information has become a great challenge. This is especially true for companies that do not have robust procedures in place for collecting and cross-referencing such data.

Retailers are keen to find solutions that tackle fraud without being too aggressive and putting customers off
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According to a recent CNBC article, retailers list fraudulent returns as a top concern, especially around the holiday season. Retail fraud is a growing issue for merchants, who are increasingly looking for solutions that will help them deal effectively with the problem in the long-term.

Loss Prevention Magazine estimates that return fraud has proved a significant drain for retailer profits this past holiday season. Of the $9 billion in losses attributable to return fraud last year, $2 billion took place during the holiday season, with more than 5 percent of holiday returns in 2017 expected to be fraudulent.

Due to the lack of visibility and direct customer engagement in online transactions, retailers are challenged to verify a shopper’s identity. Furthermore, there is often a lag between the time an order is placed and when that transaction is confirmed, opening the door for more errors or fraudulent activity.

“The larger volume of sales in the November and December months, especially around peak dates such as Black Friday and Cyber Monday, is invariably followed by a spike in cardholder disputes and chargebacks,” says Matthew Katz, CEO of Verifi, a leading global provider of end-to-end payment and risk management and card not present fraud and chargeback solutions.

Due to the lack of visibility and direct customer engagement in online transactions, retailers are challenged to verify a shopper's identity
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“For retailers,” Katz explains, “these chargebacks mean not only incurring fees from card networks and acquirers, but also losing holiday stock, absorbing additional shipping costs, and losing customer trust and future sales.

Of the $9 billion in losses attributable to return fraud last year, $2 billion took place during the holiday season
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“As consumers analyze the debt they’ve incurred during the holiday period, billing confusion and so-called ‘friendly fraud’ – where customers experience buyer’s remorse and dispute a legitimate transaction by going directly to the card issuer to obtain a refund – become an increasingly costly problem for both merchants and issuers,” he adds.

This issue continues to get worse. According to a 2017 report by Appriss Retail, total merchandise returns accounted for more than $351 billion in lost sales for U.S. retailers. To put that revenue in some perspective, the number comes close to the estimated 2017 federal budget deficit of $400 billion. Retail fraud and abuse accounted for a substantial share of these transactions – $17.6 to $22.8 billion in the United States.

This brings inevitable, and undesirable, consequences to consumers and the economy in general, as retailers are ultimately forced to offset losses by raising prices or reducing costs. This can in turn cause economic slowdown or stagnation, and ultimately lead to job losses. Last year alone, per the Appriss Retail report, return fraud cost U.S. retailers and workers between 596,000 and 775,000 jobs. Additionally, these fraudulent activities also have a significant negative impact in government tax revenues, with retail revenue losses costing states a total of $1.1 billion to $1.4 billion in lost sales taxes.

As more consumers opt to do their shopping online, accurately tracking purchases, verifying identity, and matching transaction data to customer information has become a great challenge
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Atlanta-based data analytics provider, LexisNexis Risk Solutions, recently surveyed over 650 risk and fraud executives from retail organizations. Their findings indicated that the level of fraud as a percentage of retailers’ revenue rose from 1.47 to 1.58 percent in the last year alone. It is little wonder that retailers recognize this problem as one they need to address with dedicated resources and a consistent integrated strategy.

Safeguarding the customer experience is a crucial consideration for retailers looking to implement fraud-tackling technology
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The LexisNexis study found that, although many retailers were investing in fraud monitoring, the results weren’t always effective. Companies found it difficult to strike a balance between being protective and turning away genuine customers and transactions. Retailers are keen to strike a balance between these two priorities, and to find solutions that tackle fraud without being too aggressive and putting customers off.

According to Kimberly Sutherland – a senior director of LexisNexis’ fraud and identity management strategy – many merchants don’t quite know how to achieve this balance. The problem she sees is that businesses often resort to a one-size-fits-all approach to fighting fraud, and they end up by deploying a limited set of solutions that are not up to the challenge. “These less advanced and less sophisticated legacy solutions do not appear to be working, given the sharp rise in costs and volume of successful fraud attempts,” she remarks.

According to Katz, retailing needs more effective data-sharing solutions in order to prevent such large-scale fraud without denting customer relations. “By leveraging emerging technologies, we can equip merchants and issuers with the right information, at the right place, and at the right time. This helps protect hard-earned revenue for merchants, and also helps them provide better service to consumers – allowing genuine fraud to be addressed quickly and more effectively, thus improving customer trust, retention, and loyalty.”

By providing the issuer with merchant information and robust order data – featuring customer identity and intent of sale – early on in the dispute process, it is possible to significantly help prevent such losses, argues Katz. He adds that issuing banks that neglect to include merchants early in the dispute process generate an unnecessarily high chargeback volume. Yet there is still a lack of awareness in the industry about which solutions are readily available to help them mitigate that problem.

Connecting the merchant and the issuer early in the dispute process can prevent the loss of millions of dollars in sales
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Integrating the sort of technology that companies like Verifi provide as a tailored service to merchants and issuers can help to dramatically reduce instances of fraud – and indeed help identify friendly fraud, thus saving the sale – while also improving customer relations. Through leveraging and cross-referencing of robust data, customers can enjoy a better overall experience of quick and hassle-free returns and claim legitimate refunds without ever feeling as if they’re being unfairly questioned or targeted.

Integrating the sort of technology that companies like Verifi provide as a tailored service to merchants and issuers can help to dramatically reduce instances of fraud
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Safeguarding the customer experience is a crucial consideration for retailers looking to implement fraud-tackling technology into their processes, as modern shoppers view flexible return policies as a right rather than a privilege. Customers might refuse to shop with retailers that choose to implement restrictions and checks on returns. Draconian policies could permanently cost a merchant legitimate customers, and therefore prove to be just as damaging as the mounting cost of retail fraud.

“Consumer awareness of their chargeback rights has increased,” says Julie Conroy, research director for Boston-based analyst firm Aite Group. “We’ve seen a doubling of the term ‘chargeback’ on Google for the past five years.”

In their research, Aite Group found that card issuers often give customers varying degrees of leeway when it comes to accepting evidence for granting a chargeback. Retailers complained to the firm that this lack of consistency led to mixed results from issuer to issuer. Chargebacks protect cardholders from fraud and give them recourse if goods are not as advertised, but the fact that this process is now easier for consumers also means that it is increasingly being abused.

“No one likes getting on a 13-minute call with their bank to dispute a charge,” Conroy says. “If you can allow them to do this digitally, you’re providing a better customer experience.” The other issue is cost: the average call is 13 minutes. “For some of these disputes, the consumer could be on the phone for 30 minutes,” she says. “That’s really expensive. The aggregate cost for U.S. issuers alone for call centers to field these calls is $2 billion a year.”

This is one of the reasons why so many merchants are now incorporating Software as a Services (SaaS) into their existing systems. Verifi’s Cardholder Dispute Resolution Network (CDRN), for example, is an innovative platform that enables issuers at the initiation of a dispute to redirect customer disputes to the merchant. In doing so, the chargeback process is paused up to 72 hours, allowing the merchant time to assess and resolve the dispute directly with their customer before it becomes a chargeback. In 2017, CDRN handled over 19 million disputes with an average 88% successful resolution rate on actionable disputes.

Yet even as retailers move towards embracing these comprehensive, high-tech fraud-prevention systems, offenders will inevitably continue to devise ways of taking advantage of any available loopholes. This is why it is important for SaaS providers such as Verifi to constantly improve their systems to stay ahead of the game. According to Katz, to address such needs, Verifi launched Order Insight in 2017 – an advanced collaboration platform that further applies this principle of intelligently connecting data from merchants to issuers and cardholders to access accurate and timely purchase data.

“Order Insight is the next phase in the evolution of our services, where all parties are connected to work together for mutual benefit. By being able to share and access data – such as purchase item description (size, color, style), date of purchase, merchant’s name and contact information, customer’s device used, IP address, etc. – the volume of chargebacks can be significantly reduced. This results in fewer fees and penalties imposed on merchants – but most importantly in the retention of sales and improved customer relations, all of which translate into increased profits.”

fraudulent activities also have a significant negative impact in government tax revenues, with retail revenue losses costing states a total of $1.1 billion to $1.4 billion in lost sales taxes
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Katz explains that “Order Insight enables issuers to access shared merchant data in near real-time at the initiation of a customer dispute. In addition to the goods or services in dispute, detailed information on the cardholder’s transaction history, previous disputes filed, refunds issued, and account delinquency are also instantly available, allowing each issue that arises to be efficiently dealt with to the benefit of all parties.”

The device (and type) that was used to make the purchase can be identified, in addition to the name, username, IP address, location, as well as phone number and email address included in the merchant’s customer profile to match the unique cardholder information with the bank’s system. Customers, too, have access to their order details through the issuer-hosted mobile or online banking application, providing immediate answers to a transaction query for a quick and painless resolution. If a transaction isn’t recognized, then the merchant name, address, customer service number and email address – as well as terms and conditions, warranty information and return policies – will be provided to resolve confusion created by vague descriptions on a statement. Whenever a dispute arises, each party will have access to the information to determine the legitimacy of the sale, thus reducing the impact of issues such as friendly fraud.

“Shared data can be beneficial in multiple fraud scenarios, and friendly fraud is no exception,” says Conroy, who believes that collaboration solutions, such as Verifi’s, are a crucial part of the industry’s fraud-fighting toolkit. “Connecting the merchant and the issuer early in the dispute process can prevent the loss of millions of dollars in sales,” agrees Katz, and that’s certainly something that merchants and issuers in an increasingly competitive and technology-driven retail landscape will need.

This article was originally published on World Commerce Review

Alice Bonasio is a VR Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio on Twitter

The post Tackling Retail Fraud with Technology appeared first on Tech Trends.

What will be the biggest and most disruptive technology trends of 2018? We talk to industry experts to find out.

Bias-check will become the new spell-check
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Expanding the Immersive Spectrum

We expect 2018 to be a big year for the development and roll-out of second generation hardware for VR/AR such as the Oculus Go and Magic Leap’s Mixed Reality headset – set to be better, lighter and cheaper than ever before,” says Aurelien Simon, Head of Immersive, Digital Catapult.

Just as importantly, however, there will also be increased buy-in from the creative industries in terms of immersive content production: “We’ve seen huge strides in creative content over 2017 and I expect this push for quality over quantity to continue next year. Big production studios are likely to increase their interest and presence in the VR space, while VR games production looks to take a step forward with hotly anticipated games like Doom and Fallout 4 released in VR.”

Trisa Thompson, Chief Responsibility Officer at Dell Technologies also believes that we’ll be donning our AR headsets in 2018 as the technology becomes ubiquitous and increasingly integrates with our daily routines.

“It’s happening in pockets today. But over the next year, VR and AR will cogently bring world issues into our personal reality. Time, money, and geography will no longer be inhibitors to experiencing a different environment, community or perspective.”

Global analyst firm CCS Insight says these technologies are likely to blur and become different dimensions of the “extended reality” spectrum, and the hardware releases of 2018 will reflect that trend: “We expect to see many early examples of augmented reality glasses but also several stand-alone virtual reality headsets.”

2018 will be a big year for the development and roll-out of second-generation hardware for VR and AR
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The Next Era of Human-Machine Partnership report published by Dell and the Institute for the Future (IFTF) also predicts that immersive technologies will increasingly be used to counterbalance our inherent human prejudices. ‘Bias check,’ according to Brian Reaves, Chief Diversity & Inclusion Officer at Dell, will become the next spell check as we’ll start applying VR in job interview settings to remove identifying traits, leveraging machine learning and AI to indicate key points of discrimination and program positive bias into our processes.

Immersive technologies will increasingly be used to counterbalance our inherent human prejudices
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Data-Centric Society

According to Nesta’s latest survey, 39 percent of adults say they do not mind sharing their personal information with companies, but 60 percent say they are frustrated by how much of their information has become public. 76 percent of adults around the world say they find it creepy when companies know too much about them.

“Big Data claims to be able to interpret our behaviours, which in theory should help consumers. But with Big Data can come Big Bias, and once personal information is relinquished, all consumers can do is hope companies use it responsibly,” they conclude.

Yet data experts predict that 2018 will mark the year when data starts to become a powerful tool for consumers, as regulators catch up with the data revolution and citizens are put in charge of their data. Accenture’s Fjord Trends 2018 also outlines how technologies such as Blockchain will potentially play a part in creating greater data transparency.

39 percent of adults say they do not mind sharing their personal information with companies, but 60 percent are frustrated by how much of that information becomes public
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In its latest report, the National Infrastructure Commission (NIC) indicates that data is a vital component for innovation and stresses the importance of building a broader data infrastructure and managing it responsibly for the greater good.

“Greater access to open data enables greater innovation,” according to the Open Data Institute (ODI) which predicts that over time we will see data helping to create ever greater social and economic value in sectors such as public services, retail and banking.

Vicki Cantrell, Retail Transformation Officer, at Aptos says that retailers will need to leverage data to become more customer-centric. “Analysis tools that deliver actionable data and enable organisations to correctly respond to changing conditions with actionable and repeatable processes at the point of service – whether in-store or online – will be key,” she says.

Banks are recognizing the value of collaboration and outsourcing risk solutions to companies such as Verifi to prevent fraud and improve customer experience
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According to Market Intelligence agency IDC, banks are also increasingly partnering with financial technology companies via open APIs, driven partly by new banking regulations such as PSD2, which involve sharing of customer data.

Retailers will need to leverage data to become more customer-centric
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In 2018 the EU will also begin to fine midmarket firms that violate General Data Protection Regulations (GDPR). According to Bill Weber, Principal Security Strategist at eSentire, with the influx of data breaches over the past two years, businesses will have to take the necessary steps to meet the increasing number of cybersecurity requirements set forth by regulatory bodies.

“Regulators are encouraging open banking initiatives, and banks are having to open up their systems via APIs to third parties in providing access to account information and to initiate payments,” a report by consulting firm Capgemini concludes, adding that this will increasingly facilitate collaboration between banks and FinTech companies bringing innovation to industry.

Banks, the report concludes, have a burning need to innovate in this fast-evolving landscape, but have traditionally not been very successful in fostering digital innovation through in-house efforts.

With the influx of data breaches over the past two years, businesses will have to take steps to meet increased cybersecurity requirements set by regulatory bodies
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Matthew Katz, CEO of Verifi – a FinTech company providing payment and risk management solutions to banks and merchants – agrees that factors such as the regulatory impacts of PSD2 and strong customer authentication put an increased onus on issuers and acquirers to better manage risk. He believes, however, that banks are increasingly recognizing the value of collaboration, and outsourcing those solutions to companies such as Verifi to not only prevent issues such as fraud and chargebacks, but to deliver a better overall customer experience.

Banks need to innovate but have traditionally not been very successful in fostering digital innovation in-house
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Smart Cities and Borderless Living

In 2018, we could also start seeing drones delivering not only parcels, but broader societal benefits
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Smart Mobility and automation have been big trends in 2017 as societies continued to cope with the rising demands of urbanization. This is set to continue in the coming year as 87 percent of consumers believe cities need better transportation options according to a recent survey conducted by Ford.

87 percent of consumers believe cities need better transportation options
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In 2018, we could also start seeing drones delivering not only parcels, but broader societal benefits. A report by innovation foundation Nesta predicts “cities in Britain will make the laws, rules and infrastructure decisions for drones to take off, creating an airborne version of the Highway Code.”

Smart Mobility and automation have been big trends in 2017 as societies continued to cope with the rising demands of urbanization
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Simulation tools will also enable governments to test out their policies in virtual environments before rolling them out in the real world according to Nesta’s report, which outlines a broader trend towards borderless identity and citizenship.

“We will see the rise of experiments in e-Residency as governments begin to make the nation state virtual. Citizens may be able to choose to educate their children in Finland, access healthcare from South Korea and run businesses in New Zealand, without leaving the comfort of their homes.”

IIoT and the Next Industrial Revolution

As digital fades from being stand-alone to being embedded in our physical world, our relationships with everything around us will be redefined
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In November 2017 the UK government concluded a review addressing how the country could leverage innovation to revitalise business and industry. It outlined how emergent technologies like IoT, Machine Learning and AI have made the transition away from being hypothesized innovations to practical solutions across a broad range of sectors.

“The next step for manufacturers will be to interconnect every step of the manufacturing process to create seamless and more efficient systems by utilising IoT technology to sharpen their competitive edge and better meet customer demands,” explains Richard Bradbury, UK&I Managing Director at Hitachi Vantara.

This trend is broadly defined under the umbrella of Industrial Internet of Things (IIoT) or Industry 4.0 and its transformative potential for the global economy and society is just as great – if not greater – than that of previous industrial revolutions. Definitely one to watch in 2018.

The transformative potential of Industry 4.0 for the global economy and society is just as great – if not greater – than that of previous industrial revolutions
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Symbiotic Tech

“The more our devices and voice-assistants are ingrained in our daily lives, the more we will turn to them as our moral compass — for advice. As our technology blends into our habits and is able to read and learn our emotions, fears and anxieties, it will tell us to stop wasting less food or remind us to call mom more often. We can expect to see a rise of people objecting to the moral judgments imposed by the likes of Alexa,” reads the Sparks&Honey 2018 Trends Brief, which goes even further, predicting that we’ll soon connect our bodies using technology in increasingly visceral ways.

“We’ve grown comfortable enough with the pervasive use of technology to let it become part of us via implants, such as bio-tattoos or microchip implants for banking and biometrics. Elon Musk’s Neuralink is on a mission to connect our brains to the cloud and Emily Borghard is now recognized as one of the world’s first true cyborgs, thanks to a Neuropace chip implanted in her brain,” it concludes

The more our devices and voice-assistants are ingrained in our daily lives, the more we will turn to them as our moral compass
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“As digital fades from being stand-alone to being embedded in our physical world, our relationships with everything around us will be redefined,” agrees Baiju Shah, global co-lead, Fjord and managing director, Accenture Interactive.

Nesta’s research also backs up this view, pointing to the fact that AI is already showing impressive healthcare capabilities such as diagnosing Parkinson’s via audio recordings and cancer via molecules in breath. It predicts that in 2018 one or more of the major technology companies will buy a healthcare provider to turbocharge their efforts in that space. “In combination with new forms of facial recognition, AI is being trained to read minds and moods with increasing accuracy,” is says, adding that we will increasingly see it being used to predict and manage both physical and mental health outcomes.

Tech Trends’  Virtual Reality Consultancy services offers support for companies looking to get a foothold in the growing Mixed Reality spectrum and enhance their brand strategy with immersive technologies.

Alice Bonasio is a VR Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio on Twitter.

The post Looking Forward to 2018 Tech Trends appeared first on Tech Trends.

Cyber Week and Black Friday shopping figures are in, and show how businesses that embrace technology are thriving in the digital age.

In the run-up to Cyber Week, experts were already predicting a huge holiday season for e-commerce, but with Black Friday and Cyber Monday now behind us and Christmas just over two weeks away, it is safe to say that 2017 is shaping up to be a record-breaking year, especially for mobile.

In the run-up to Cyber Week experts were predicting a huge holiday season for e-commerce
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The National Retail Federation reported that 81 million U.S. residents shopped online on Cyber Monday, compared with 66 million on Black Friday. According to Bigcommerce, an e-commerce platform which serves thousands of merchants worldwide, during Cyber Five, the five-day shopping period spanning Thanksgiving through Cyber Monday, brands using their services experienced an average sales increase of 21%, which is 4% above the industry average.

2017 is shaping up to be a record-breaking year, especially for mobile
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Cyber Monday was the biggest sales day for online and for mobile ever in the US
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This was also the first year in which mobile orders surpassed desktop sales volume during Cyber Five. In 2016, 54% of orders were on desktop devices, and 46% originated from mobile devices. In 2017, mobile orders accounted for 54% of all orders, surpassing desktop on all Cyber Week days. The data also revealed that iPhone users spent 7.1% more during Cyber Five than Android users.

Cyber Monday was in fact the biggest sales day for online and for mobile ever in the US. While online sales amounted to a total of $6.59 billion mobile broke a new record by reaching $2 billion. The Verge reported that mobile also dominated over desktop for the first time for Shopify merchants, which include brands as varied as Tesla Motors and Kylie Cosmetics, according to the company.

This was also the first year in which mobile orders surpassed desktop sales volume during Cyber Five
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People now have different expectations of how technology should enable shopping experiences
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These numbers tell an interesting story, because they illustrate how far consumer behaviour has shifted in recent years. People now have different expectations of how technology should enable shopping experiences, and businesses that don’t meet those expectations will inevitably lose sales.

These numbers illustrate how far consumer behaviour has shifted in recent years
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None of this happened overnight, of course. Brands have long been investing in ways to leverage data to build customer profiles, inform their marketing strategy and outreach, and refine their sales funnels. But the capacity to extract actionable insights from large datasets was traditionally reserved for bigger companies such as Amazon, who had the vast resources required to dedicate to this. Advances in AI and machine learning have, however, democratized access to such insights and tools, and started to level out the playing field.

Advances in AI have democratized access to insights and tools, and started to level out the playing field
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And this, according to Jimmy Duvall, BigCommerce’s Chief Product Officer, is a key part of the value that platforms such as his can offer to smaller merchants, equipping them with the tools and insights that allow them to offer experiences on par with the likes of Amazon.

“BigCommerce looks at same-store sales to determine the real increase in revenue and orders data year over year for ecommerce brands on the platform with insights into category-specific insights, device trends and purchase activity by region,” he explained. “The significant increase in same-store sales this year further highlights that small and mid-sized retailers continue to thrive, even as Amazon and other industry heavyweights expand into new markets and categories. We fully expect this to be the biggest and most successful online selling season in history.”

This doesn’t mean that smaller merchants are only in competition with larger platforms such as Amazon, Google Shopping or Ebay, however. We live in an age where consumers demand omnichannel experiences, and e-commerce platforms need to provide an open architecture that can be seamlessly connected to other business applications, reducing complexity and operational costs for merchants wherever possible. In practice, that means that merchants can use a single product catalogue to sell their wares across a variety of channels in a frictionless way.

Merchants can use a single product catalogue to sell their wares across a variety of channels in a frictionless way
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BigCommerce supports services such as PayPal One Touch, which boasts an enviable conversion rate of 87.5%
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Steve Fusco, vice president and general manager of global distribution at PayPal, says they thrive on this collaborative approach, which means, for example, that BigCommerce supports services such as PayPal One Touch, which boasts an enviable conversion rate of 87.5%.

This year, however, merchants also gained access to data from PayPal Marketing Solutions, which provides insight into customers’ buying behaviours and lets merchants add customized banners to their online stores.

“BigCommerce and PayPal have much in common at the core of our businesses,” said Fusco in a statement, “and through our expanded relationship we are delivering access to fully integrated products and services that help merchants increase sales and average order value.”

Offering customers an array of choices not only in terms of product, but financing, has been one of the key factors in this explosive sales growth. “Since offering PayPal Credit, we’ve seen a significant increase in orders and conversion with lower cart abandonment rates,” said Abe Issa, CEO of Florida-based online retailer DealBeds.com.

Data creates opportunities to improve in-store experiences
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E-commerce is being driven by insight, and brands both great and small are embracing data to reflect their customer needs and by giving their customers what they want, reap the financial rewards of site experience enhancement, optimised checkout and platform modernisation.

Data creates opportunities to improve in-store experiences and make customer service provision more agile and efficient. As platforms continue to integrate big data into their offering, we will continue to see the consumer journey improve across all sectors. The adoption of the developing mobile and AI technologies will increasingly enable retailers to deliver experiences that are perfectly tailored to each customer and market.

E-commerce is being driven by insight, and brands are embracing data to reflect their customer needs
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The future of retail is doubtless going to be immersive, experiential, and personalised, and that paints a bright picture for businesses that embrace technology and innovation.

This article was originally published in the Huffington Post

Why E-commerce Needs to Look Beyond the Shopping Cart https://t.co/125ti2BlB2

— Alice Bonasio (@alicebonasio) December 10, 2017

Alice Bonasio is a VR Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio on Twitter.

The post Holiday Shopping is Getting Techy appeared first on Tech Trends.

To leverage Big Data and build an effective Artificial Intelligence infrastructure, enterprises must embrace collaboration.  

Using data smartly can give your business a crucial competitive advantage
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In a digital economy, the rule of thumb tends to be that the smarter your use of data and technology, the more of a competitive edge your business has. A recent report by Teradata, based on over 260 interviews conducted by research firm Vanson Bourne with senior IT and business decision makers, found that there is widespread enthusiasm for adoption of AI, with 80 percent of enterprises reporting that they were already investing in the technology in some capacity, and over 30% planning to expand their investment in the are over the next 36 months.

“C-level executives – namely CIOs and CTOs, maintain they are committed to AI in their enterprise, because of the expected ROI over the next 10 years.” The report therefore concludes that executives will accept those challenges as the long-term benefits clearly outweigh near-term pain. In fact their analysis showed that over a five-year forecast, organisations effectively expected to double their money when investing in AI: For every $1 spent on AI technologies, organisations predicted a return on investment of $1.23 over three years, $1.99 in five years, and $2.87 over a ten-year period.

The Economist – in a phrase that has since become rather cliché – put forward the idea that “data is the new oil,” and World Economic Forum has now designated Big Data as a new kind of economic asset, just like currency or gold.

A study by the MIT Center for Digital Business confirms that data-driven businesses do indeed have the edge. It surveyed 330 leading U.S. Businesses and found that companies that focused strongly on data-driven decision-making had an average of four percentage points higher productivity and six percentage points higher profits.

C-level executives are committed to implementing AI in their enterprise
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Yet as these results indicate, it would perhaps be more accurate to say that data is in fact the new oxygen. Whereas it is still true that businesses that best leverage data and AI will gain a significant competitive advantage, it is probably fair to say that those that fail to make their organisations data-centric will eventually not be able to survive at all in the digital age.

Data is in fact the new oxygen
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While most people agree on the essential role that Artificial Intelligence and Data play in their organisation’s success, there are significant challenges. The overwhelming majority of business leaders surveyed in the Teradata report anticipated major barriers for adoption within their organisation, with roadblocks ranging from an inadequate IT infrastructure to shortage of in-house talent.

The majority of business leaders surveyed predicted significant roadblocks to AI adoption
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In their book The Sentient Enterprise, The evolution of Business Decision Making – launched at the Teradata Partners’s Conference last month – Oliver Ratzesberger (Teradata’s Chief Product Officer) and Mohanbir Sawhney from the McCormick foundation talk about how agility is key to getting the enterprise to the sentient point where it can analyse data and make decisions in real time.

The crux of the problem enterprises face lies not in the difficulty of gathering data, but in extracting insights and then turning these into actionable processes. The reality is that we live in a time of data overload, and companies can easily find themselves trapped in reactive mode, spending most of their time sifting through mountains of data and making decisions only when problems emerge, rather than anticipating them.

The problem enterprises face is in extracting actionable insights from data
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To tackle these problems, enterprises need access to key talent and infrastructure so as to enable the leveraging of Artificial Intelligence and Big Data. Increasingly, this is not being done “in house” but rather in partnerships with dedicated providers. These go beyond the traditional SaaS and becomes much more of a “Platform as a Service” model that incorporates complex customization and consultancy services.

All banks need a scalable, advanced analytics platform
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Teradata’s Think Big Analytics team, for example, worked with Danske Bank to create a fraud-detection platform that uses machine leaning to analyse tens of thousands of latent features, scoring millions of online banking transactions in real-time to provide actionable insight regarding true, and false, fraudulent activity. Together, they built a framework within the bank’s existing infrastructure, crating advanced machine learning models to detect fraud within millions of transactions per year, and in peak times, many hundreds of thousands per minute:

“Using AI, we’ve already reduced false positives by 50% and as such have been able to reallocate half the fraud detection unit to higher value responsibilities,” explains Nadeem Gulzar, Head of Advanced Analytics, Danske Bank. “There is evidence that criminals are becoming savvier by the day; employing sophisticated machine learning techniques to attack, so it’s critical to use advanced techniques, such as machine learning to catch them.”

Using AI, Teradata and Danske Bank reduced false positives by 50%
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“All banks need a scalable, advanced analytics platform, as well as a roadmap and strategy for digitalization to bring data science into the organization.” says Mads Ingwar, Client Services Director at Think Big Analytics. “For online transactions, credit cards and mobile payments, banks need a real-time solution – the platform we developed with Danske Bank scores transactions in less than 300 milliseconds. It means that when customers are standing in the supermarket buying groceries, the system can provide immediately actionable insight. This type of solution is one we’ll begin to see throughout organizations in the financial services industry,” he concludes.

Fintech company Verifi, also collaborates with banks and merchants to connect the multi-layered data-streams and combat fraud. The work the company does with is based on optimising data transmissions using APIs (Application Programming Interfaces). This is much more efficient because whereas legacy systems rely on processing large numbers of files sent in bulk, APIs can process data in real-time.

Verifi collaborates with banks and merchants to connect multi-layered data-streams
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The Verifi system collates APIs from the merchant shopping cart, customer relationship management (CRM) system, shipping data system, and others, and provides the merchant with better information to handle charges disputed by consumers, allowing them to often resolve the issue directly rather than have the bank issue a chargeback. Merchants benefit as they’re able to control the message to the consumer, and banks are happy because the sale remains and they reduce their operating costs. It is the sort of technology enabled, data-driven system that is a true win-win.

Friendly fraud and chargebacks cost $130 million in Q1 2017 in the U.S.
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One of the problems that such systems help tackle is so-called “friendly fraud,” a term used to describe a situation when a customer experiences “buyer’s remorse” and “tries it on” by putting in a claim directly with their bank or card issuer for a refund, when the sale did in fact legitimately occur. Julie Conroy, Research Director of the Aite Group says that in the U.S. friendly fraud and chargebacks would likely near $130 million, in Q1 2017 alone.

“Since many such claims are relatively low-value, banks will often issue the refund rather than dedicating the resources needed to investigate and dispute each transaction,” explains Matthew Katz, Verifi’s CEO Their research in fact showed that up to 86% of cardholders bypass the merchant and contact their issuing bank directly to dispute or question a charge on their bill. “When you add all of these claims up, it amounts to a huge problem for the industry, with billions of dollars in costs being passed onto merchants, and – ultimately – to the consumer,” he says.

Friendly fraud amounts to a serious problem, confirms a report from Javelin Research estimates that the increase in card-not-present (CNP) fraud and chargeback management now consume between 13% and 20% of operational budget for such retailers.

Even with such resources dedicated to fighting fraud, however, not having the right information on hand in real time can mean that businesses are not only vulnerable to fraud, but also risk losing customers and reputational goodwill by challenging legitimate customer claims.

“The key functionality we enable is to connect all the parties to the transaction with the right information at the right time,” says Katz. “Our Order Insight platform provides robust transaction data on each sale, like the merchant’s name and contact information, date of purchase, device name used in the order process and many more important details, directly to the consumer via their bank’s mobile or online interfaces. In most cases, having access to this data can resolve a dispute and avoid a phone call to the issuer altogether, saving the merchant money and keeping customers happy.”

The report by Javelin Research concludes that partnering with third-party providers like Verifi makes sound business sense, in that it frees up merchants to focus on their core business. “It is imperative that merchants stay customer-friendly in the face of growing fraud pressure, yet the amount they have to put into building, managing, and maintaining in-house solutions has significant negative impact on their ability to scale their business over time. The projected growth of CNP fraud will introduce a new level of burden for digital merchants, which they will be unable to combat from a resource and scalability perspective. This will increase the pressure and negative impacts on them because they will be hit by fraud that they can’t handle. Their inability to scale quickly enough may result in measures that will hinder customer experience.”

The key advantage that these technologies – when properly leveraged – bring to enterprise is their ability to streamline and break silos
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The key advantage that these technologies – when properly leveraged – bring to enterprise is their ability to streamline and break silos. Deeper integration and more collaborative approaches to technology can help deliver robust information to the right parties at the right time, ultimately enhancing the experience for customers and users, improving efficiency across the board, and providing higher returns for companies and investors. The pieces of the puzzle are all there, it seems, but stakeholders must all work collaboratively to bring them together.

This article was first published on ERP in News

How Collaboration is key to leveraging AI and Big Data https://t.co/UGfUT6KjYl via @erpinnews@alicebonasio #tw17 #erpinnews #eintechnews

— ERPINNEWS (@erpinnews) November 15, 2017

Alice Bonasio is a VR Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio and @techtrends_tech on Twitter.

The post Working Together to Build a Big Data Future appeared first on Tech Trends.

With the global cost of chargebacks mounting for consumers, banks and merchants alike, we need innovation to fight back

Online fraud is now the most commonly experienced crime in England and Wales, according to a report published by the UK National Audit Office (NAO). Up to 1.9 million cyber-related fraud incidents were estimated to have taken place last year alone, with the cost likely to run into billions of pounds.

Online fraud is the most commonly experienced crime in England and Wales
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The report also outlined that the NAO faces a significant challenge in influencing partners, such as banks and law enforcement bodies, to take on the responsibility of preventing and reducing fraud. As a “low value but high volume crime”, fraud is often overlooked by governments, law enforcement, and industry alike, says Amyas Morse, Head of the NAO. Acknowledging that the landscape for tackling online fraud is extremely complex, the report calls for an urgent response to address it.

Fraud is often overlooked by governments, law enforcement, and industry
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The report further cites that online fraud is under-reported; even where data is available there is a lack in the sharing of information between government, industry, and law enforcement agencies. In fact, there is no formal requirement for banks to report fraud or share reports with government, yet we see consistent evidence of fraud recurring all over the world. This is an enduring and global problem, one that takes a heavy toll on merchants and service providers of all sizes, as well as banks, issuers, and ultimately customers.

There was a 17% rise in consumers being caught out buying phantom goods online
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The growing scale of online fraud also suggests that many people are still not aware of the risks, and that there is much to be done to change behaviour. This is also evidenced in separate figures from Citizens Advice showing a 17% rise in consumers being caught out buying “phantom” goods online. This type of cybercrime occurs when fraudsters advertise items at cut prices on social media sites like Facebook and Instagram—as well as online marketplaces such as Gumtree and eBay—and con buyers into spending on average £1,100 on products ranging from cars to flights and even insurance, which simply do not exist. In only a few months, January to March this year, Citizens Advice logged over 3,600 complaints about such phantom goods.

These scams can have a lasting financial and emotional impact on consumer confidence and their relationship to merchants. While educating consumers is both sensible and necessary, the NAO report stresses that government and industry still have a responsibility to protect citizens and businesses. The report also found that the protection banks provide varies, with some investing more than others in educating customers and improving their anti-fraud technology.

Given that organized attacks of online fraud is likely to increase, this investment is absolutely essential—yet keeping up with the latest techniques employed by fraudsters can put tremendous strain on a company’s logistics. While few would argue that fraud detection and prevention is a priority for businesses, the fact is most businesses lack the necessary resources to build and maintain such solutions. It is the industry’s responsibility, however, to keep up—and ideally get ahead—of these fraudsters in order to protect both themselves and consumers.

Technology adoption can have significant impact on fraud prevention
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The adoption of such technologies has indeed been shown to have a significant positive impact on fraud prevention. Take, for example, EMV—the technical standard for smart payment cards and terminals that have allowed the rollout of payment solutions, such as Chip and Pin and Contactless. In the UK, its implementation led to a dramatic reduction of 32% in the levels of overall card fraud in the seven years following their introduction in 2004, according to official figures from the UK Card Association.

Such measures have undoubtedly made fraud much more difficult to perpetrate in “card present” payment scenarios, yet the shift to online retail has brought with it an entirely new set of challenges relating to fraud prevention and mitigation. There is no getting away from the fact that individual shopping habits have fundamentally changed over the past decade, and that the shift towards online and mobile shopping is not going to be reversed. PricewaterhouseCoopers’ (PwC) Total Retail 2016 Survey found that the popularity of mobile shopping continues to rise, stating that “46% of our global sample buys products via mobile at least a few times a year, compared to 40% last year”.

Chargebacks happen when customers dispute a transaction and request a refund
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While this might be good news for consumers in terms of better prices, more choice, and added convenience, it leaves the bulk of “card-not-present” transactions—which are the norm in online shopping and vulnerable to problems such as chargebacks. These chargebacks happen when customers dispute a transaction in their statement and request a refund—often going directly to their card issuer or bank and bypassing the merchant altogether.

Gross card fraud losses for 2015 reached $21.84 Billion
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According to The Nilson Report, gross card fraud losses for 2015 reached $21.84 Billion, not including the costs incurred by issuers, merchants, and acquirers for their operations, call centres, and chargeback management. By 2020, the report concludes, card fraud worldwide is expected to reach $31.67 billion, and that measures such as improving methods of reducing fraud on card-not-present transactions are critical to keeping those losses in check.

This is a complex issue, since there are many factors which can trigger a chargeback in the first place, and a blunt approach can cause a merchant more harm than good. One of these factors is known as “buyer’s remorse”—where a customer finds a product at a cheaper price elsewhere and uses the system as an alternative returns and refund mechanism. This is one of the forms that so-called “friendly fraud” takes. Another common scenario is where a person requesting the refund is not entirely sure they haven’t made the transaction, but will “try their luck” anyway. Since the cost of investigating such claims is often much higher than the value of the refund itself, banks will mostly opt to issue the refund without dispute, and some customers have learned to take advantage of this to manipulate the system. According to industry research firm Aite Group in their Impact Note of August 2016, 60% to 70% of chargebacks are the result of first-party or friendly fraud.

There are many ways for businesses to make themselves less vulnerable to chargebacks
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Business can minimise vulnerability to chargebacks in various ways. These include ensuring that they build a good relationship with their customers, by providing accurate product information and keeping the lines of communication open, so customers are more inclined to approach merchants with queries than to go directly to the issuing banks to initiate a dispute. Having a clear and efficient refunds policy also minimises the chance of experiencing so-called buyer’s remorse, where a customer is tempted to use chargebacks as a backup refund mechanism. However, many customers still get confused when seeing an unfamiliar name appear on their statement, as often merchants will be listed under names which differ significantly from their brand or trade name.

“When a customer sees a charge they don’t immediately recognise on their card, they often ask the bank to remove that charge from their statement”, explains Matthew Katz, CEO of Verifi, a provider of end-to-end payment protection and management solutions. “This is done by calling the bank directly to raise a dispute, leaving out the merchant who could potentially provide further information to clarify what the charge relates to. In fact, our research has found that up to 86% of cardholders bypass the merchant and contact their issuing bank directly to dispute or question a charge on their bill”.

While banks generally issue a refund to the customers, the process often has a very negative impact on overall customer experience, causing confusion and lingering trust issues which can lead to future sales being lost. This has an added impact on the merchant’s bottom line, on top of the fees, fines, and operational expenses of handling the chargeback in the first place.

Chargeback costs can quickly snowball
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These costs quickly snowball, ranging from administrative resources needed to investigate claims and process refunds, to fielding customer queries and potential loss of legitimate sales, present and future. Add this to the operational expense of preparing and shipping merchandise, as well as the value of the goods themselves which often must be written off, and the cost for merchants quickly adds up. Ultimately, this is also very bad news for consumers, as these costs will eventually trickle down the supply chain and translate into higher prices. The true price of these chargebacks is not reflected in the refund amounts alone, significant as these may be. In their September 2015 report, The Impact of Fraud and Chargeback Management on Operations, Javelin Research found that organizations typically spent between 13% and 20% of their operational budget on fraud and chargeback management.

“Globally, chargebacks continue to grow and represent a significant challenge”, agrees Katz, “To address this problem, we need solutions that better align the interests of cardholders, merchants, and issuing banks on a global scale, focusing on continual innovation and refinements that are essential to effectively combat this problem”, he believes.

This is what Cardholder Dispute Resolution Network (CDRN) does, according to Katz. Verifi’s solution—which covers approximately 50% of the US market and boasts a 90% resolution rate—was named for the fifth year in a row as “Best Chargeback Management Program” by CNP Expo. It is now continuing to expand in international markets such as the United Kingdom, Verifi having opened an office in London in 2016, and now announcing a key strategic partnership with payments processor MegaCharge.

Verifi handles over 200,000 individual chargebacks each month
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One of the problems that CDRN addresses, according to Katz, is the fact that by the time merchants learn of the issue, it’s often too late to stop the chargeback. “Our patented closed-loop technology integrates directly with the top issuing banks. This pauses the chargeback process for up to 72 hours and redirects cardholder disputes from the bank to the merchant in near real-time. The merchant will have more time to assess and resolve the dispute before it ever becomes a chargeback. To date, we are supporting more than 25,000 accounts globally and handling over 200,000 individual chargebacks each month—amounting to an estimated $195 million in chargebacks prevented.

“The problem of chargebacks and friendly fraud are not only impacting businesses’ bottom line, but hindering future growth and jeopardizing customer retention, trust, and satisfaction rates. For merchants to strengthen their risk management and counter friendly fraud, the ideal line of defense would permit merchants to provide insights into the cardholder’s order as shopping cart-level data. This would feature merchant details and even the device used to make the purchase through the financial institution’s platform—all at the time the dispute arises. This deeper level of data can help cardholders better understand their purchases and avoid filing false cases of fraud that result in lost sales, higher labour costs and more”, Katz concludes.

Since the bulk of consumer purchases will be made online, it stands to reason that to tackle online fraud we must leverage data and technology in increasingly sophisticated ways. As the recent reports on the growing scale of this global problem show, gone are the days when the tools to do so could be considered an optional extra. They have, quite simply, become business essentials for every merchant looking to conduct business in the digital age.

This article initially appeared on World Commerce Review

Alice Bonasio is a VR Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio and @techtrends_tech on Twitter.

The post Can Technology Prevent Online Fraud? appeared first on Tech Trends.

Non-legitimate refunds cost merchants billions every year, but Fintech company Verifi is using data insights to spare them costly chargebacks.

In a digital economy, the rule of thumb tends to be that the smarter your use of data and technology, the more of a competitive edge your business has. This is particularly true in the e-commerce and retail sectors, where small inefficiencies can quickly compound and become large-scale problems.

In a digital economy, leveraging contextual data gives businesses an edge
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Take, for instance, the deceptively innocuous-sounding problem of “friendly fraud.” The term is used to describe a situation when a customer experiences “buyer’s remorse” and “tries it on” by putting in a claim directly with their bank or card issuer for a refund, when the sale did in fact legitimately occur.

“Since many such claims are relatively low-value, banks will often issue the refund rather than dedicating the resources needed to investigate and dispute each transaction,” explains Matthew Katz, CEO of payment management and resolution platform Verifi. Their research in fact showed that up to 86% of cardholders bypass the merchant and contact their issuing bank directly to dispute or question a charge on their bill. “When you add all of these claims up, it amounts to a huge problem for the industry, with billions of dollars in costs being passed onto merchants, and – ultimately – to the consumer,” he says.

Julie Conroy, Research Director of the Aite Group adds that in the States, in Q1 of 2017 alone, friendly fraud and chargebacks would likely near $130 million, with the global figure in 2016 being closer to $30 billion. There are many reasons why consumers make these claims, yet they’re not all necessarily sinister or even dishonest. In an age of speedy payments, where we can tap our cards or phones at a shop and walk away with our purchases within seconds or order through a mobile app with a single click, we often forget what we bought over the course of a day, nevermind a week or a month. I for one know that over the years I’ve had trouble clearing my bank’s security questions when they required me to name the amount of the last few transactions I had made on a certain card. A guesstimate was all I could ever manage without actually looking up a statement.

Friendly Fraud is a growing problem for retailers and digital merchants
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This is further compounded by the fact that often the registered merchant name that appears on statements can be different from the trading name on their shop front or website – which is why services such as PayPal usually make a point of telling you that “this transaction will appear on your statement as…” But regardless of the reasons behind it, friendly fraud amounts to a serious problem, especially for merchants dealing in digital goods. A report from Javelin Research estimates that the increase in card-not-present (CNP) fraud and chargeback management now consume between 13% and 20% of operational budget for such retailers: “Fraud and chargeback spend is front and centre for digital goods merchants, with these merchants dedicating significant proportion of operational costs to keeping fraud in check.”

Verifi CEO Matthew Katz

Verifi connects merchants with contextualised transaction information
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Yet even with such resources dedicated to fighting fraud, not having the right information on hand at the right time can mean that those businesses not only leave themselves open to fraud, but they also risk losing customers and reputational goodwill by challenging legitimate customer claims. To avoid such issues, banks and merchants need to be able to share customer and transaction information in near real-time with the issuing bank or consumer, and that’s where platforms such as Verifi provide the missing link.

“The key functionality we enable is to connect all the parties to the transaction with the right information at the right time,” says Katz. “Our Order Insight platform provides robust transaction data on each sale, like the merchant’s name and contact information, date of purchase, device name used in the order process and many more important details, directly to the consumer via their bank’s mobile or online interfaces. For those consumers who do call the bank, the same information is provided to the bank’s call centre personnel to appropriately legitimise the sale and address the consumer’s questions or concerns. In most cases, having access to this data can resolve a questionable charge and avoid a phone call to the issuer altogether, which saves the merchant money while keeping customers happy.”

Partnering with third-party providers like Verifi makes sound business sense, according to Javelin Research, whose report recommendations lay out the advantages of outsourcing fraud solutions in order to allow merchants to focus on their core business: “The amount they have to put into building, managing, and maintaining in-house solutions has significant negative impact on their ability to scale their business over time.” They also warn that businesses need to be mindful of maintaining and building customer relationships while elevating security checkpoints to combat CNP fraud. “The projected growth of CNP fraud will introduce a new level of burden for digital merchants, which they will be unable to combat from a resource and scalability perspective. This will increase the pressure and negative impacts on them because they will be hit by fraud that they can’t handle. Their inability to scale quickly enough may result in measures that will hinder customer experience. It is imperative that merchants stay customer-friendly in the face of growing fraud pressure.”

It makes sense for merchants to outsource their fraud solutions
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Verifi is rapidly expanding into the UK market
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Verifi is investing heavily into its UK market expansion, as well as many other global markets. Since opening their London office just under a year ago, the California-based company says the demand has far exceeded expectations, and they are now focusing on extending their UK network coverage for their Cardholder Dispute Resolution Network (CDRN) to 70% by the end of 2017.

“We currently support hundreds of merchants and recognised global brands in diverse industries spanning digital music, information technology and entertainment, as well as top High Street and UK e-commerce clients,” says Katz, who adds that there is still enormous scope for expansion as the online retail market continues to grow and fraud prevention needs evolve. “Our challenge and goal is to make sure that our data platforms and solutions keep pace with evolving demands, without compromising the customer experience,” he concludes.

Alice Bonasio is a VR and Digital Transformation Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio on Twitter.

The post Fighting Friendly Fraud with Big Data appeared first on Tech Trends.