Digital Channel Fraud Protection: A Growing Area of Concern

As digital channels evolve, businesses have increasingly more ways to connect with their customers, and their customers are taking full advantage. In fact, over 35% of consumers expect to be able to connect with companies on any channel they choose. The majority of customers switch between their various devices throughout the day and expect brands to be able to do the same for customer service purposes.

For many consumers, the omnichannel approach is a step in the right direction, given the desire for frictionless, on-demand service. One report from Aite Group noted that 95% of businesses agree that reducing friction in the customer experience is just as important as or more important than mitigating losses. However, it has also created new challenges concerning fraud detection and reduction, particularly as cybercriminals now have more pathways to commit fraud in the first place.

What Is Digital Channel Fraud?

Digital channel fraud, also called omnichannel fraud or cross-channel fraud, is the collective term for all fraud that occurs through various digital touchpoints. Your website, social media pages, email, live chat features, call centers, and mobile apps all offer opportunities to commit fraud. Each one can be a standalone source to create information or initiate transactions, usually by using seemingly authentic customer details. 

When fraudsters steal information through one channel, they can use that information to launch account takeovers via other channels. For example, a criminal may have just enough details to fool a call center agent, and once they bypass security, they can change account passwords or gain access to critical details from which they can profit.

How Digital Channel Fraud Occurs

Digital fraud evolves in a number of ways, many of which circle back to convenience. COVID-19 has made consumers wary to venture out in public and they prefer to conduct business remotely. Even when in-person options are available, many consumers still prefer digital transactions and methods of contact. 

What’s more, consumers who didn’t previously conduct certain transactions online have been suddenly forced to do so due to the pandemic, and these new behaviors are likely to persist once pandemic conditions improve.

Hackers are taking advantage of the expanding preference for convenience through fraudulent account creation and account takeover fraud. 

A recent report from Aite Group noted that account-level fraud is a precursor to transaction-level fraud. When companies can stop fraud at the account level, they also reduce financial losses stemming from transaction fraud.

Financial services, e-commerce, travel companies, marketplaces, and shipping and delivery companies are all at risk for digital channel fraud.

The Challenges of Preventing Digital Channel Fraud

As new technology to prevent or deter fraud continues to improve, fraudsters are also evolving their techniques to continue gaming the system. This presents several unique challenges for organizations:

Fewer In-Person Interactions

In the past, customers went into a bank or retail store and conducted business face-to-face. This offered the bank or retailer a chance to verify a customer’s identity in person, such as with a photo ID. 

However, digital channels have complicated identity verification, especially when data breaches have revealed personal identifying information (PII) that fraudsters can use to pose as someone else. 

Also, many companies are still using single authentication factors that only ask for one piece of information, whereas multi-factor authentication asks for two or three. Stronger authentication requires two or more of the following:

• Something the user knows (e.g. security questions)
• Something the user has (e.g. sending a code to their phone or email)
• Something the user is (e.g. Captcha)

Faster Payments

Digital channel fraud consists of fraudsters leveraging many moving parts to obtain valid user credentials and using those details for their own gain. The time between these two activities continues to shrink as fraudsters are finding faster ways to launch their attacks.

Today’s transactions don’t take days to process. Rather, many will show up in a user’s account on the same day or in real time. By the time a consumer notices that their account has been compromised, severe damage may have already occurred.

Lagging Fraud Detection

Traditional fraud detection systems can be effective in finding fraud after the fact, but they do little to stop fraud in its tracks, or better yet, prevent fraud from occurring in the first place.

That’s because most fraud detection methods rely on extensive data training and rules-based systems that are only as powerful as the information they already know. This means that unknown types of fraud are likely to fly under the radar until the system can be taught to look for those types of fraud.

Disparate Fraud Detection Systems

One of the biggest challenges in fighting multichannel fraud is simply too many tools used by disparate systems. In many cases, each channel will have its own type of fraud prevention, but the channels aren’t connected to other channels. This prevents companies from seeing the big picture and how certain events are related to others. 

To effectively fight back against digital channel fraud, companies need to consider ways in which they can integrate their fraud detection methods in a single platform for all channels.

Taking a Comprehensive Approach to Digital Channel Fraud Protection

In these times of uncertainty, one thing remains clear: fraudsters will take every opportunity to take advantage of an unsuspecting victim. They’re continually seeking ways to circumvent new fraud detection methods, so simply deploying a solution doesn’t mean your work of protecting against fraud is finished.

Rather, companies can fight back against fraud with tools that evolve with fraudulent patterns, at scale and in real-time.

DataVisor delivers a comprehensive fraud and risk management platform that protects organizations from digital channel fraud. Unlike point solutions that only address a particular use case or provide protection for a single point of entry, DataVisor assesses events across the entire customer account lifecycle by leveraging:

• Device intelligence
• Patented unsupervised machine learning technology and deep-learning algorithms
• An advanced rules engine powered by AI-enriched features
• A vast Global Intelligence Network (GIN) of more than 4.2 billion user accounts
• Advanced analytics and case management
• Advanced bot detection

With this unmatched collection of technologies and capabilities, DataVisor delivers the only fraud and risk management platform for continuous protection throughout the customer account lifecycle, especially for digital channels. 

Schedule a quick demo to talk with DataVisor’s fraud experts on how DataVisor is helping to combat digital channel fraud.