Industry trends update: managing fraud and risk throughout the payment lifecycle

As financial losses linked to identity fraud continue to increase—13% year over year according to Javelin Strategy & Research¹—it's important for businesses to do all they can to thwart cybercriminals.

A specific type of fraud that's on the rise is account takeover (ATO)—when cybercriminals exploit authentication vulnerabilities. In 2023, U.S. consumers reported fraud losses from ATO of $13B, up from $11B in 2022.¹

As the report explains, many types of accounts can be vulnerable to takeover—including bank, eCommerce, loyalty, and more. Individuals who reuse passwords across multiple accounts can be especially vulnerable to ATO, as cybercriminals may use credentials stolen in unrelated attacks to access their accounts.

Most fraud management solutions come into play when a transaction is attempted—but that may be too late if a fraudster has already taken over the account. Compromised accounts can produce fraudulent transactions, which can lead to costs associated with chargebacks, dispute resolution, and inventory losses, as well as reputational or brand damage.

To help close the opportunity gaps that traditional authentication methods offer cybercriminals, it's worth considering a specialized solution that intervenes sooner. Our Account Takeover Protection solution monitors high-risk behavior when attempts are made to log in to or update accounts—helping keep the fraudsters out before they can try to transact. At the same time, the solution helps ensure genuine accountholders have a smoother login experience.

As already mentioned, consumers who reuse credentials across accounts can be a weak link in the fight against fraud. But, despite their drawbacks, passwords remain at the top of the identity pyramid, according to a recent report from 451 Research: 59% of respondents to its survey say their organization employs usernames and passwords as a form of authentication.²

The Javelin report¹ cited above suggests an alternative approach that can help strengthen identity verification: "taking the consumer out of the authentication equation." Among the alternative options it puts forward are:

Using consortium data feeds for identity validation

Consortium data—data pooled from multiple businesses—can help strengthen the fight against fraud, as it powers AI-driven fraud management systems with much larger datasets for decision-making across the payment journey. One example is Visa Protect, our portfolio of enterprise risk solutions. Informed by a massive dataset that combines billions of transactions with data from thousands of issuers and merchants, Visa Protect solutions help identify fraud across the payments ecosystem.

Using AI to build more effective behavioral models

These behavioral models are based on the characteristics and behavior patterns of individuals and groups. The Identity Behavior Analysis feature of our Decision Manager fraud and risk management platform analyzes buyer behaviors to help merchants increase accept rates, lower review rates, and boost their bottom line.

For many organizations, gaining access to innovative products and services that incorporate technologies like AI involves working with vendors and partners. A recent Forrester report³ suggests that: "For this outsourcing strategy to yield maximum benefits to the business, risk pros must focus their attention on managing risk exposure from these third-party entities."

Forrester's research reveals that respondents who make the connection between increased levels of enterprise risk and increased reliance on third parties frequently describe risk management as an accelerator of innovation (34% compared with 27% for respondents overall).

Businesses that choose Visa Acceptance Solutions to help them access new capabilities can benefit from working with:

• A trusted partner—the Visa Acceptance Platform's active-active architecture delivers 99.99% uptime, helping ensure business continuity.⁴
• A partner for innovation—a single connection to our platform enables access to a wealth of Visa products and services and to an ecosystem of partners. Together, we can help you design advanced, customized payments solutions to support your own and your merchants' goals.
   

We'd love to talk with you about these and other trends and innovations in the payments industry. Feel free to reach out and discover how Visa Acceptance Solutions and our uniquely open payments platform can help you build the future of payments.

And keep an eye out for our next update for more news and commentary.