As fraud evolves, so must your defenses. Discover how to keep your platform safe.
Transcript
Hi everyone, I'm Billi Jo Wright. I'm the Chief Risk and Compliance Officer for the Worldpay for Platforms line of business. I've been in the business for 25 years now with a really strong concentration in risk management.
What I love about my job here at Worldpay is how closely risk aligns with the overall software platforms and their kind of journey of embedding payments into their overall offering. I really do look at it as a true partnership and us helping them kind of understand and manage risks but still allowing them to control that customer experience and embed that solution into their offering. I'm going to turn it over to John and let him introduce himself.
Thanks Billi Jo. Hello everybody, I'm John Winstel. I work in our product group here at Worldpay. I head up our optimization products and what those are is a lot of our value added service products that we offer out to customers as we're helping them to optimize their payment experience. So what that means is looking at things like fraud management, credential management, gift loyalty are all part of our optimization products suite. I've been with Worldpay for 12 years, been in the payments industry for roughly 20 years now.
So we've definitely seen a bit of an evolution as we think about the payments industry. And, I know one way that I think about it, a lot of people just associate it with processing transactions, right. But as we look at this evolution from a payments perspective, we're seeing new entrants that are part of the ecosystem with software partners and platforms being one of them. And it's really enabled them to think about their business strategy and their overall growth strategy and has brought some tremendous opportunity as we think about that space.
But with that opportunity also comes risk, right. So, the fraud is no longer really just a merchant issue. It is expanding in that ecosystem. From your perspective, I think it would be really interesting to get your feedback on why fraud is really more of a platform wide issue.
Yeah, yeah, 100%. And you bring up a great point, Billi Jo. I mean, just start to look at the partners that we work with and, and you think back to like, even as we transact in our daily lives, how many solutions that you're working with where payments is embedded into that solution, into that platform at the at the end of the day. And what our customers and what Worldpay is trying to do, is we help to facilitate, to facilitate those transactions is really focused in on the customer experience, making sure that the customers have a have a good experience all throughout that entire payments journey.
So from the time that they're selecting the good or service on that platform that they want to purchase, to the point of check out, that is as seamless as possible that we are providing the different ways that the customers want to pay on that, on that platform. And, and I think that's where thinking about fraud upfront is so important. And that's where we come in here at, at Worldpay.
I've still yet to meet a merchant that has told me they went into business because they're really good at fraud management and managing disputes. I'm still waiting to meet that specific merchant. The whole reason why these merchants and a lot of our partners are going into business is because they've developed a good, or a service, to sell to their customers. And it's really, really important to them that those customers come back and they create that brand loyalty.
And we see that across the whole ecosystem, to where it's not even just from a merchant or a software provider standpoint, even the issuing bank that that the card holder, the customer, is using at the end of the day, they want to be able to create that trust so that their customer knows they can rely on that card. And that it's secure, and it’s a payment method that's going to work for them.
So I think with that, Billi Jo, what would be interesting is if you could provide even, some of the examples that you see within your role as being the head of risk and compliance for the platforms group.
Yeah, and it's quite interesting. And I could probably spend all day just talking about the interesting use cases that we've seen over time. But you know, I'll try to focus on a couple things that I think are pretty relevant to our space right now. And if I start with the onboarding experience for merchants, right? How do they open merchant accounts? You know, what we're really seeing is a is a rise in synthetic fraud and really AI driven identity type of fraud as well, right?
So you've got fraudsters, or fraud rings out, there that their business is creating or trying to open accounts with fake businesses and they're using, stolen identities, stolen merchant data, to open those accounts with the sole purpose of, perpetrating fraud and processing as many fraud transactions as they can. You fold that in with AI and, and their ability to generate IDs, and documents, that look really authentic, right? So, it makes it really hard to distinguish between a fake document and, and a real document, right? And so, the impact there is really; it could increase friction on the onboarding process because you're trying to make that establishment. So, unless you're using tools that also have that AI learning capability and detection, it could have an impact on the overall onboarding process.
Another example would be card testing and, and bot attacks, right? But that's an industry wide problem that people are combating every day, a card attack or card testing, is really where a merchant, or platform, will see a surge in transactions that are occurring from multiple different IP’s over a course of minutes. And essentially their goal is to test stolen card numbers to see which ones are still valid, right. And the impact to a customer there is, a lot of times there's service disruption, because the merchant account needs to be shut down to stop the activity increase in fraud losses.
And at the end of the day, it's just a really bad experience for those that are involved. And then the last one I think I'll bring up is a pretty interesting one to me, and it's around friendly fraud. You'll hear kind of talked about in the industry and it's basically where consumers are disputing legitimate transactions, like I didn't get the product or they want to return it even though they already have the product, and they're asking for a refund. I think I saw a stat that 75% of chargebacks in some sectors, primarily digital and e-commerce, are a result of friendly fraud. So that's a rising problem that we're seeing in our industry.
Those trends that you bring up. Some of these deep fakes that I've seen, they're so realistic that it's really hard to discern what's real, what's reality, what's fake, and where the fraudster is. And you brought up the points on card testing.
This is one of those again, going back to the merchants, especially an SMB merchant. And that's a lot of the clients that we work with; it's the hair stylist that's utilizing the solution to manage appointments, and their customers to set up appointments and pay. It's the storage facility that needs a solution for their recurring payments. It's the restaurant that's looking for a solution that manages all aspects of their restaurant, at the end of the day, plus payments. And so again, none of these folks are going into business saying, I know how to manage fraud. It's the last thing that they're thinking about. These points that you bring up, the card testing alone, just some of the fees that these merchants can get hit with; it can cripple them from that perspective.
Yeah, and I think this is really interesting. The pain points that you're seeing on your side, from a a risk and compliance standpoint, it really layers in nicely with having that layered approach to fraud management.
And I can talk a little bit about what we do from a Worldpay product perspective to help customers there, so when we think of, fraud and risk management at the merchant level, so these are merchants who have been onboarded. We know that they're good merchants, that the transactions that they are we're seeing come through the system. But from a whole payment's ecosystem standpoint, you got to really think about that commerce journey, so the customer coming on to your website, your payments app, whatever it might be, they might be coming into your store, or restaurant location, to make payments. How do you facilitate those? How do you check, from a security standpoint, and the validity of those payments? That's where some of the things that we've been doing here at Worldpay.
The last piece that I'll add in terms of that layered approach is going back and thinking of the customer experience. So, at the end of the day, we don't want to be too stringent with our rules. We don't want to make it to where it's difficult for a customer to make their purchase, because you know the cost of acquiring a customer is so high, that the last thing we want to do is decline those valid transactions because we suspect that they're fraud, because our fraud rules are so stringent.
I think there was a stat from last year where it showed $43 billion in fraud losses. That’s what the market sees today globally. But if you look at the cost of false declines, and what that means is the transactions that we are declining to help prevent fraud from occurring, it was 10x that. It's like $443 billion that's costing merchants.
And so that's real money. Those are bad experiences for customers. So, we have to think about that from an optimization standpoint. We want to make sure that we're doing what we can, from a fraud standpoint, to make sure we have those low false positives. Then you also want to make sure that you have the tools in place to ensure you have the latest and greatest card credentials on file.
So if I'm the storage facility, and I have that recurring monthly payment that's out there, if a customer gets a new card, the last thing I want to do is have to pick up the phone and ask them for their new card number, or send some sort of call to action to that customer. And that's where things like Account Updater can come in. There are other ways that you can use things like network payment tokens to help create a more secure transaction, at the end of the day. But we also see, from an increased perspective, as high as six to seven percent lift in overall authorization. I know I just said it, and I'm doing the hand movement too, for any of you folks who have younger kids that are out there. But anyway, just some of the things that we think that you can couple together and have that layered approach when it comes to fraud management.
Yeah, I couldn't agree more with the layered approach, the balance, as you think about fraud mitigation, and there's obviously the risk controls and the tools that you can put in place for merchants and platforms to help manage that risk. But it has to be balanced with the customer experience, and the customer experience really needs to be at the front forefront of that.
I've definitely seen different strategies across the competitive landscape and, I think the one thing that we really try to do here at Worldpay is look at the segment, look at the software partners, and how their business operates and really approach them separately and not have this blanket approach across the board. So, I think that's really important.
I want to wrap this up here, John, I really enjoyed our conversation. I think the takeaway from me is that fraud is increasingly becoming a challenge for our software platforms, and the right payments partner, I feel, really does make a difference. I just want to call out that we do have an in-depth fraud guide that can be downloaded that will allow our partners to explore the latest strategies. And if anybody wants to connect with us for a demo, I think it would be really interesting to see how you can protect every payment and power and power possible.
Yeah, 100%. Yeah, thank you everybody. And I think, as Billi Jo was talking about that fraud guide, knowing is half the battle at the end of the day in terms of how to protect you and your businesses.