Fraud a Daunting Challenge in Digital Customer Engagement Age

Last year, officials at Maritz Motivation Solutions introduced a new LoyaltyNext® Fraud Management Suite, an evolution enabling marketers and brands to detect and prevent fraud in loyalty programs.

In the U.S. alone, 3.3 billion loyalty program memberships have stored points and miles worth an estimated $48 billion, according to the Gartner Group. Loyalty program fraud can be perpetrated in a variety of ways, such as hackers stealing credit card and member identity data, or thieves taking points or attempting fraudulent travel redemptions, according to Barry Kirk, vice president of loyalty solutions for Maritz Motivation Solutions.

Now, Vesta Corp. released a new white paper titled, “The CFO’s Challenge: Fighting Fraud in the Digital Age,” which explores risks that CFOs must assess as fraud management and cybersecurity challenges reach new heights.

According to the white paper, CFOs face new pressures in their efforts to preserve and expand revenue streams. Cybersecurity and other fraudulent threats—especially via online channels and card-not-present transactions—have spiked in the past 15 months since the EMV liability shift and are aggressively eating away revenue streams.

“While organizations race to expand their e-commerce and digital goods offerings to stay competitive, fraudsters are finding new ways to circumvent security measures,” said Vesta Chief Operating Officer Tracy Metzger. “CFOs need to be mindful of the ways in which fraudsters’ tactics can undermine organizations' financial stability and plans for growth.”

Online sales already represent more than 8.1 percent of all retail sales, yet organizations are losing 7.6 percent of their annual revenue, across all channels, to fraud, the white paper notes.

E-commerce merchants dealing exclusively in digital goods are suffering the most, losing 8.6 percent of revenue on average to fraud and related costs. And these figures fail to quantify the impact of false-positive transactions, whereby fraud controls calibrated too tightly—in efforts to eliminate fraudulent transactions—block legitimate shopping activities. Customers who endure the inconvenience and embarrassment of having their purchases denied at check-out report diminished loyalty to the business they had been trying to patronize.
Chirpify Marketing Manager Kim Blomgren told Loyalty360 that maintaining secure processes for payment – especially online – is also important for consumers.

“Customers also want to know that if they purchase from you online that their personal and credit card data is safe and secure,” Blomgren said, “Bottom line: It’s important to dial in your cybersecurity controls such that you are able to balance fighting fraud and protecting customers with making it easy to do business with you.”
Ernan Roman, president, ERDM Corp., and author of “Voice of the Customer Marketing,” told Loyalty360 that his company’s VoC research shows that the risk of fraud is on the minds of most consumers.

“Therefore, we recommend that brands take specific steps to help customers and the general public, by providing education and tips to prevent fraud,” Roman explained. “They should also provide specific guidelines and points of contact if customers suspect they have been victims of fraud. Guidelines for dealing with this increasingly likely situation should be designed into a company’s overall Customer Experience strategy.”

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