Minding fraud and security risks

A proliferation of technology-enabled options has become available to retailers wanting to make it easy as possible for their customers to buy from or communicate with them since Retail Technology magazine first started looking at the areas of loss prevention and security in an annual report

This year is no different. But the growth in internet shopping – accounting for over 10% of total UK sales last year – has kept minds firmly focused on securing card present and not present payments, as well as those increasingly carried out over mobile – tablet or smartphone – devices.

Mark Reeves, senior vice president of international sales for authentication and fraud detection technology vendor Entrust, commented that, as we begin to see new threats emerging with the increasing number of people adopting mobile payments systems, keeping pace with them will mean deploying more sophisticated technology.

“Behavioural and transactional fraud monitoring, out-of band transaction verification and mobile transaction verification and signature can help to tackle this,” he said. “The challenge, however, is strengthening security without impacting the end user experience. A non invasive, easy-to-use authentication method, employed only when required and based on the risk of the specific transaction, can help to achieve this.”

Managing security risks

Risk modelling can maximise the value of security investments, according to Jason Trigg, chief executive of security IT provider The Cardinal Group. “To get the most from loss prevention systems, businesses must also be able to understand the data that their technology systems provide, and convert that raw data into information. By doing so they will ultimately improve their return on investment and reduce losses,” he said.

“Risk Modelling – the process of taking demographic data and statistics and applying it to social data and then comparing it with budget spend – enables patterns to be identified and predictions made to reduce future risk.”

Gabriel Hopkins, head of e-commerce products at payment processing provider WorldPay, highlighted a growing trend among fraudsters to target low-value goods merchants to test stolen card data and see if a transaction can be successfully processed. “For a digital download merchant the loss of product is instantaneous as the product is usually accessible immediately upon purchase.”

He said merchants need to consider fraud management processes to protect against being targeted: “The administration of managing fraud chargebacks is a resource-heavy task and, when the transaction is for a very low amount, a disproportionate amount of time and effort is wasted. This can often lead to the merchant just swallowing the cost of the chargeback as opposed to disputing it because the time and effort of this process outweighs the cost.

Guarding retail perimeters

Katrena Drake, director of European operations at cloud hosting provider FireHost, said more payments are being processed online than ever before and, with so much valuable information at risk, retailers must take steps to ensure that their websites are not left vulnerable to attacks from hackers. “A successful hack can compromise credit card data and deal a severe blow to customers’ confidence in a brand,” she said. “To protect against this risk, retailers must prioritise PCI DSS [Payment Card Industry Data Security Standard] 2.0 when specifying a hosting solution.”

The recent Global Retail Theft Barometer showed that shoplifting, fraud and administrative errors cost British retailers £4.9 billion in the 12 months to June 2011 – highlighting the financial impact that shrinkage has on stores.

Neil Matthews, vice president in Northern, Central and Eastern Europe of the Barometer’s sponsor Checkpoint Systems, commented: “By integrating innovative security solutions into traditional systems, including 3-Alarm technology, shrinkage will undoubtedly be reduced.

“Solutions like source tagging also mean retailers are benefiting from items arriving store ready, equipped with advanced tagging technology. These can include RFID [radio frequency identification] tags that give retailers greater insight into stock levels and ensure merchandise is on the shelf when the consumer wants to buy it.”