BlogApril 23, 2024

Do Advanced Fraud Detection Tools Really Make a Difference?

The battle against eCommerce fraud is relentless. With fraudsters constantly evolving their tactics, businesses must stay ahead of the game to protect their operations and maintain customer trust. A recent study by the Merchant Risk Council (MRC) illuminates the effectiveness of advanced fraud detection tools in identifying and preventing fraud. In this article, we’ll highlight the key findings and takeaways from the research.

To learn more about the research and how to protect your shop, download our new ebook — 2024 Fraud Trends: A Guide to eCommerce Threats & How to Mitigate Risk.

Key Findings: A Shift in the Fraud Landscape

The MRC’s comprehensive survey, which encompassed over 1,000 eCommerce shops, aimed to assess the effectiveness of fraud management tools in mitigating risks over the past year. The findings were eye-opening:

  • There was a significant decrease in the percentage of eCommerce revenue lost to fraud on a global scale.
  • There was a significant drop in order rejection rates and fraud rates on domestic orders.
  • There was a significant reduction in the share of eCommerce orders leading to fraud-related chargebacks.
  • The cost of managing payment fraud has remained steady at about 10% of annual revenue for the past three years.

Merchant Risk Council Report: Changes in Fraud Management KPIs – 2022 vs. 2023

Source: Merchant Risk Council

This highlights a critical paradox: while fraud’s impact is diminishing, the cost of fighting it remains the same. It appears that merchants who are invested in preventing fraud are figuring it out and using their funds — and fraud prevention solution — wisely.

Advanced Fraud Detection Tools: More Than Just a Necessity

An intriguing aspect of the study is the difference in fraud detection between MRC members and non-members. Members reported higher levels of specific fraud types, suggesting that they might have more sophisticated fraud detection tools. This discrepancy raises an important question: Are these tools mission-critical in identifying and mitigating risks more effectively? And if you think fraud isn’t a problem, is it simply because you don’t have the tools in place to properly detect cases?

Advanced Fraud Detection Tools Make a Difference: MRC Members Catch More Fraud Attempts Than Non-Members

Source: Merchant Risk Council

The study strongly suggests that fraud detection tools are not just beneficial but essential. Having the tools gets you to point A: being able to identify that fraud is even happening. They enable businesses to pinpoint and address vulnerabilities, turning the tide in the ongoing war against eCommerce fraud. However, it’s not merely about having these tools but leveraging them to their fullest potential.

The Persistence of Phishing and Reshipping Scams

Among the top 10 fraud types, phishing and reshipping scams have seen the most notable increases. This shift underscores the need for continuous innovation and adaptation in fraud prevention strategies. Phishing, in particular, exploits human vulnerability, making it a challenging threat to counter solely with technological solutions.

Don’t Wait for Fraud to Find You

The MRC study is a clarion call for eCommerce businesses to reassess their fraud prevention strategies and the tools they use to help scale operations. In an environment where fraudsters are continually innovating, complacency can be costly. Investing in advanced fraud detection tools is not just about safeguarding revenues; it’s about ensuring the longevity and trustworthiness of your eCommerce venture, so your business is equipped to face tomorrow’s challenges. Remember, in the digital world, your best defense is staying informed and prepared.

Read 2024 Fraud Trends: A Guide to eCommerce Threats & How to Mitigate Risk to learn the latest best practices for keeping your shop safe.

How *Advanced* Fraud Detection Tools Make a Difference

Advanced fraud detection tools are pivotal in fortifying eCommerce platforms against the ever-evolving landscape of cyber threats, marking a significant leap in how businesses protect their operations and customer trust. The difference between standard tools and sophisticated systems is that they employ a combination of artificial intelligence, machine learning algorithms, and big data analytics to scrutinize transaction patterns in real-time. They are also highly customizable, based on how a business operates, and able to discern between legitimate activities and potential fraud with unprecedented accuracy.

By analyzing vast arrays of data points — from the speed of a transaction to the geographic location of the buyer — these tools can identify subtle anomalies that might indicate fraudulent activity. This not only boosts the rate at which fraud attempts are caught but also reduces false positives, ensuring genuine customers are not inconvenienced and good revenue isn’t blocked. Furthermore, advanced fraud detection solutions are continuously learning and adapting to new fraud tactics as they emerge. This dynamic approach means that eCommerce merchants are not just reacting to threats but staying several steps ahead, safeguarding their revenue and maintaining a secure shopping environment for their customers.

Ready to learn more?

Book a demo and see our accurate real-time fraud screening for eCommerce in action.

Ready to learn more?

Book a demo and see our accurate real-time fraud screening for eCommerce in action.

We offer Starter Plans for even the smallest sized businesses, including a free plan and plans that include chargeback protection for companies that process less than $50,000/month.

Businesses that process more than $50,000 in revenue/month qualify for custom pricing. Book a demo and see our accurate real-time fraud screening for eCommerce in action.

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