8 May 2015

5 steps to overcome the hidden risk to the merchant world Written by Monica Eaton-Cardone, CIO and Co-Founder of Global Risk Technologies. Successful merchants know where their money comes from and where it goes. They know the opportunities for the business and they know the risks. But how many merchants recognise that one of the biggest threats to their bottom line comes from an unlikely source? The actions of the ‘ordinary’ consumer are causing bigger industry losses than identity fraudsters. ‘Friendly fraud’ has been growing 41% in recent years, costing over €10bn in industry losses, compared to around €2bn lost through ID fraud, according to Visa.  As ecommerce continues to grow at close to 20% per year in the EU, with total ecommerce revenues predicted to be €185.39bn for 2015, its vital merchants know about the risk, are able to identify it and can move quickly in order to mitigate the risk. What is friendly fraud? Friendly fraud is the hidden problem in ecommerce because merchants don’t often realise the extent of it and it is not typically carried out by criminal gangs, but by ordinary consumers. More and more customers are fraudulently claiming chargebacks on credit card transactions and merchants are bearing the brunt of it. The worry for merchants is that they often do not know about the problem until they get hit with a chargeback – 58% of cardholders do not contact the merchant at all but file the dispute directly with the bank. This can happen accidentally if a consumer reports a charge because they didn’t realise another member of their household made the purchase, or if the charge information on their statement didn’t match up to a recognised retailer name. It can happen intentionally if a consumer receives the product they ordered yet claims to the bank that they did not, essentially gaining a free product. Meanwhile the merchant gets hit by having to refund to the bank the value of the product in question. The merchant also loses the value of the product delivered and not returned from the consumer, as well as facing a fine from the bank and damage to credit ratings and potential loss to reputation. One thing that will really shake up the industry globally is the US adopting EMV protocols. The big date is the liability shift on October 1st 2015. From this date, any US merchant who is defrauded by card and is not using EMV protocols will have sole liability for that fraud. What will this mean for the wider world of global payments? If the UK example is anything to go by, fraud won’t be going away. EMV is well established in the UK but card fraud figures continue to rise with £479m lost in 2014. Of this figure, £331.5m was for Card-Not-Present (CNP) fraud and, of this, £217.4m was via ecommerce. Put simply, when the one door is closed to fraudsters, they simply find other opportunities. In this case, that opportunity is CNP fraud. 5 simple steps to minimise the merchant risk It is difficult to target or treat because the criminal in these cases is a consumer who is normally the least suspected, and protected behind an appearance of assumed innocence or even naive ignorance of the fact that there are gross consequences for their actions. 1. Employ best practices: Maintain delivery receipts wherever possible, clearly define your refund and cancellation policies, respond promptly to customer service queries and offer extended hours so your customers go to you first if they have a problem. A monthly newsletter can remind them that you are available to assist with any resolution they may require, which will help lessen the necessity for them to contact their bank. 2. Identify and tackle threats early: Risk mitigation services help predict threats and treat them before they harm revenues, growth, or profits. Maintain dynamic reporting on fraud metrics, transaction and issuer scoring and revenue predictions. 3. Dispute chargebacks with confidence: Recover lost revenue and restore tarnished reputations with tactical representation services that deliver results while helping to reduce future chargebacks. 4. Improve your customer service: Only 14% of customers contact the merchant before charging back. When the merchant is unaware of the chargeback, the merchant is unprepared, so make is easier for customers to get in contact with you. Monitor social media and track all customer interaction. 5. Balance security with customer experience: Security is a hygiene factor in online purchasing behaviour. Customers simply expect it. So be secure, but don’t let that security get in the way of a smooth and speedy customer experience. Friendly fraud is a symptom of the digital entitlement age. People expect instant gratification and results and friendly fraud is part of that trend. Whether it is a legitimate or fraudulent claim, it is seen as an easy way to get money. Yet the elephant in the room is the seeming unwillingness of card schemes to tackle the problem. The ideal solution is a comprehensive and highly scalable enterprise solution for chargeback compliance, risk mitigation, fraud management and merchant sustainability services to European acquirers, card issuers and local merchants. Friendly fraud is not always caused by criminal or malicious intent, but that makes it all the more difficult for many merchants to track, analyse and resolve. It is important that merchants get the education they need on friendly fraud and how to combat it, which in turn should prompt education programmes for customers to help reduce the problem in the first place. To find out more about friendly fraud and for help on managing the risk, visit http://bit.ly/GRT-FF.

Fidelity goes pink to celebrate royal birth In celebration of the birth of the Princess of Cambridge, and inspired by the marvellous transformation of London’s illuminated landmarks this week, Fidelity Integrated has turned pink. Fidelity’s Managing Director Ken Kay explains, “Following nine months of speculation as to whether the Royal baby would be a Prince or Princess, we thought it would be fitting to celebrate the birth of Princess Charlotte by turning our logo pink. It is certainly not a common colour for a security and fire systems company but you never know we might start a trend!” To find out more follow Fidelity on Twitter @FidelityIS and Facebook @FidelityIntegrated Links www.fidelityintegrated.com

Security breaches peak in spring, springtime is not all sunshine when it comes to security, warns Farsight Security Services. The remote monitoring station’s statistics have revealed a peak in security breaches in March, April and May 2014. More than double the number of arrests occurred in spring 2014 compared to winter 2013/14. In total the number of incidents raised was 46 per cent higher in spring compared to winter, resulting in an average of two incidents per site during the spring months. Arrest rates in spring remained at a peak in comparison to summer 2014 as arrests dropped by 75 per cent in June, July and August. Malcolm O’Shea Barnes, senior operations manager at Farsight, explains: “With arrests and incidents peaking in the spring months, now is the time to be assessing security needs.” However, the Farsight statistics show, on average, sites received more than six incidents each throughout 2014. Malcolm says: “Of course, security needs to be a year round priority. Sites will see each season present different security challenges. “For example, with the peak in incidents, in spring it’s worrying to see false alarms occur because of minor things like fast growing foliage obstructing cameras. “The statistics show that sites cannot afford to take risks with false alarms. Spring is a great opportunity for security installers to promote their maintenance services. “Beyond that, the high number of incidents annually highlights security systems as a necessity. Each of the incidents recorded could potentially have cost the site owner thousands of pounds if they had not invested in 24/7 remote monitoring.” An incident is when a suspicious activity has been observed, either when a crime has taken place or when the activity could lead to a crime. Links www.farsight.co.uk

Genetec Stratocast partners with Digicel Group Genetec Stratocast, a manufacturer of open platform, unified IP security solutions today announced that Digicel Business, a leading communications provider in the Caribbean and Central America has chosen Genetec’s Stratocast™ cloud-based Video Surveillance as a Service (VSaaS) solution to power its latest business solutions product, Digicel Eye. Designed for small and mid-size business (SMB) customers, Digicel Eye enables business owners to keep an eye on their business operations from their computer, cell phone or tablet, regardless of where they are, 24/7. Digicel Eye is available as a fully managed service to Caribbean customers and delivers high-end and reliable video surveillance without the costs and complexities associated with installing and managing on-premises hardware and storage. It comes with round-the-clock customer support as well as cloud-based storage—eliminating the possibility of data loss when customers need it most, in the event of a natural disaster, physical damage or theft. With Digicel Eye, customers enjoy greater peace of mind and convenience knowing that their business is safe, and operations are running smoothly wherever they go. Powered by Stratocast, Digicel Eye allows business owners to view live and recorded video that is safely stored in the cloud from any Internet connected-device. “We’re delighted to launch Digicel Eye as our cloud based video surveillance solution that is specifically designed for small-and-medium sized businesses. With this solution being accessible from anywhere, using either a tablet, PC or mobile phone, we have kept end user mobility in mind. We are proud to provide this service in partnership with Genetec – global leaders in IP security,” said Martin Carroll, Digicel Business, Director of Products. Powered by Microsoft Corp.’s Azure cloud-computing platform, Stratocast enables customers to deploy an affordable and easy-to-use cloud-based video surveillance system that provides support for HD video resolutions, and edge recording capabilities to reduce the bandwidth that is required. Links www.stratocast.com www.digicelbusiness.com/en/our-solutions www.genetec.com