Fraud Prevention: Driving Innovation as Digital Transactions Grow Exponentially

Proactive fraud prevention
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We’ve all heard the phrase “the best defense is a good offense.” The analogy proves as true on the football field as it does in the field of online fraud prevention. Too many instances exist where companies rush to implement a basic fraud protection system just to comply with regulations, or worse, right after a cyberattack or breach.

This kind of reactive approach results in ineffective fraud protection and sets a shoddy foundation that jeopardizes an organization’s innovation pipeline. Hastily made decisions regarding fraud protection could have detrimental ripple effects that erode a company’s core. Moreover, companies and organizations that do not take a proactive approach to fraud prevention risk appearing incompetent and irresponsible at best, resulting in loss of revenue and possibly a tarnished brand.

So Why Aren’t Companies Being Proactive?

In its report entitled Moving Beyond Ad Hoc Integrations to Intentional Fraud Prevention Design (Tricia Phillips, Sept. 8, 2016)Gartner noted that “by 2021, 60 percent of enterprise e-commerce retailers will fast-track an integration to a new fraud prevention technology during or following a fraud attack without adequate analysis, leaving data and operational gaps, excessive false positives, preventable fraud and operational inefficiencies.” The knee-jerk reaction to “plug up the holes” takes precedence over finding out why there was a hole in the first place, and that’s a problem.

No person or team in charge of cybersecurity wants their organization to be vulnerable. The issue of weak fraud prevention strategies stems from two critical mistakes: organizations failing to grasp the crippling impact an attack or breach leaves in its wake and organizations assuming they are prepared for an attack simply because they have some kind of prevention strategy, even if that strategy was hastily implemented and provides outdated protection. Company leaders do not always look to the future and are reluctant to approve the time and money necessary to develop such a tailored plan. What they fail to realize is that a quick-fix solution, even if it meets compliance requirements, could stifle any efforts to proactively prevent fraud.

Cybercriminals Target Unprepared Companies

Cybercriminals are not stupid. Their ultimate goal is stealing the maximum amount of money with the minimum amount of effort. Just like a thief preferring to burglarize houses with unlocked doors, cybercriminals opt to target weak systems because it’s easier. Companies that have gaps in their fraud security system become bigger targets to cybercriminals.

According to cyber insurance company Lloyds, cybercrimes costs businesses as much as 400 billion dollars a year, and the figure is on the rise. Moreover, 83 percent of organizations that suffered from a fraud incident experienced a loss in clients, reputation or productivity. They also find themselves mired in a mess of regulatory issues. A sophisticated fraud attack or breach can be detrimental to any organization, but it could be absolutely crippling to smaller businesses that do not have the means to recover after an attack.

Steps Every Organization Must Take Immediately

Implementing a successful fraud prevention strategy requires extensive knowledge of the current and future fraud landscape, as well as time and money to design a specific and effective strategy that addresses an organization’s unique needs.

Companies concerned with warding off current and future fraud attacks should consider doing the following:

  • Adopt a multi-layered approach to fighting fraud. Understand there is no “silver bullet” solution to stopping every type of attack. Protect all channels because cybercriminals will certainly attempt to abuse each and every one.
  • Consider the needs and limitations of every department when developing a fraud prevention strategy. Fraud impacts a company as a whole, so a strategy that uniquely protects each department should be employed.
  • Implement a diligent and proactive monitoring service that rapidly detects and removes threats before end-users are even aware something is wrong. It is difficult to protect against the unknown, therefore monitoring for threats and increasing visibility into the entire spectrum of possible attacks should be a critical pillar of any fraud protection strategy.
  • Don’t forget about customers – give them a hassle-free, but secure experience. When designing a fraud prevention strategy, many organizations overlook the customer. End-users and clients become frustrated with fraud prevention methods that are cumbersome and clunky.
  • Look toward the long-term. Too often during times of crisis, companies will rapidly adopt a new element as part of their fraud prevention arsenal. These hasty choices aren’t usually forward-thinking solutions that will protect into the future. Intentional fraud design is the foundation upon which future developments will occur, especially during the continuing years of digital transformation when online transactions are growing exponentially.

There is no doubt that cyberattacks cause regulatory, financial and image issues. It may even prove impossible to recover from a large-scale attack, especially for smaller organizations. Company leaders need to stop viewing fraud prevention measures as burdensome expenses and start considering them a necessity for business longevity and growth.

Ultimately, company leaders must ask themselves two significant questions: Does the threat of fraud justify allocating more time and resources to develop a stronger prevention strategy? Are we willing to risk customer trust? The former should be a resounding “yes” and the latter must be a definite “no.” It’s time for leaders to realize the decisions they make about fraud prevention strategies today will impact their business’s health tomorrow.

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