With pre-authentication fraud detection, dynamic 3DS, smart routing, and recovery of declines, the automated tool streamlines successful transactions.
Forter, an e-commerce fraud prevention provider, announced the development of its Smart Routing tool on Thursday. The product will help prevent the revenue loss merchants experience from false payment declines during the transaction process.
“The problem that we’re looking at, it’s a pretty pronounced one, is that one out of every 10 legitimate purchases that a consumer makes with a retailer is getting declined,” said Angela Whiteford, CMO of Forter.
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The way to know if a transaction is fraudulent or not is by looking at data. Merchants and banks look to their own data when making that decision, but their data is siloed and not very extensive. Forter, however, holds vast sets of data on consumer behaviors and more than 750 million identities around the world, which it analyzes to know if a transaction is good or not, Whiteford said.
Some people are falsely declined because of a lack of information, but another instance has to do with the manner in which merchants route transactions. Some merchants have one processor or acquirer they use to route transactions, but the best practice is to have multiple so that there are many avenues through which the transaction can be attempted, Whiteford noted.
“Really smart payments people within a merchant or a retailer know this,” Whiteford said. “They know that trying to route those transactions in a different way helps them, and it helps increase their approval rates. But there’s no automated way to do it.
“The way they do it today is they write some manual rules and then try to route with the manual rules, then you don’t know if it worked or not,” Whiteford said. “And you write another rule; it’s this iterative process, and again, they don’t have access to the data.”
Forter’s Smart Routing tool uses the data to automate and streamline this process, making the transaction successful and efficient.
What Smart Routing does
The Smart Routing system blocks fraudulent transactions before bank authorization, increases conversion by triggering 3DS authentication when necessary, uses artificial intelligence (AI) to avoid authorization declines, and recovers legitimate transactions that would’ve been lost after being declined, Whiteford said.
Through all of those actions, Smart Routing is able to eliminate false declines and reduce lost revenue by 50%, according to a press release.
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“With our platform, we’re using our network data, which really is the largest amount of data, to say, ‘When this transaction comes through, is it legitimate or fraudulent?’ If it’s legitimate, we then say, “OK, this transaction’s legitimate, we are going to route it to the right processor or acquirer. We’re going to route it in a certain way to the issuing bank to make sure it gets approved,'” Whiteford said.
Sometimes transactions still get declined, however. In those cases the system can either attempt to recover the decline, or ask you to verify a purchase via 3D-Secure (3DS).
“About 15% of transactions that get declined, we can recover with our declined recovery piece. We can do a couple of things. We can take the decline and reroute it a different way so it gets approved, and we can take that decline and provide 3DS,” Whiteford said.
3DS occurs via a SMS from the user’s bank, said Galit Shani-Michel, vice president of payments at Forter.
“You have an SMS from your bank, reply to the SMS, try again. We help you tell your bank that everything is OK, or we tell you to call your bank and we tell you exactly where to call and what to tell them. Once you call your bank, you try again, it will work,” Shani-Michel said.
Many high-profile businesses are already successfully using Forter Smart Routing including Hugo Boss, Drunk Elephant, Mattress Firm, Nordstrom, Priceline, and TGI Fridays.
Impact of COVID-19
The coronavirus pandemic resulted in a major spike in online shopping activity, since so many brick-and-mortar stores shut down. More online transactions, however, means more opportunities for payments to be declined.
“The biggest issue is that with COVID-19, most merchants are seeing that 30% of all their buyers online are brand new. That’s double what they’ve seen in the past,” Whiteford said. “That means you have never seen this buyer before, so there is more likelihood that the merchant could decline them, that the acquirer or processor could decline them, and that the issuing bank could decline them.”
Since the customers are brand new, retailers are more likely to not have the data necessary to verify their purchase, meaning the new customers could be declined.
This problem is big for merchants, because retailers obviously want to keep customers coming back. If a new customer has a bad experience, like getting payment declined, they may not attempt to purchase from that merchant again, Whiteford said.
“What’s at risk with COVID, is that the decline rate [becomes] even higher because you’ve got all these new users coming online,” Whiteford said. “Using our network, using the good understanding of legitimate behavior versus fraudulent, we have a good idea to accurately identify that this is good buying behavior and route it in a way so this person gets approved.”
For more, check out COVID-19: Five business continuity challenges coming to the retail industry on TechRepublic.