Online & Mobile Commerce: Fraud Products to Help Protect E-Commerce Channels

October 3, 2016         By: Tom Groenfeldt

In today’s commerce environment, the digitization of payments is on the rise as brick-and-mortar retailers are seeking to provide customers with a convenient online shopping experience, which enables consumers to shop from anywhere – even their mobile device.

This remains a growing commerce channel, but one to pay attention to when it comes to fraud. While online commerce transactions make up 8.5 percent of total card transactions, they account for 49 percent of all U.S. card transaction fraud.[1] Additionally, instances of online fraud are predicted to increase as more transactions move online and as fraudsters look for an easier target than card-present transactions, which are becoming more secure due to chip cards and chip-grade mobile wallets.[2]

False declines are a specific area to watch, which take place when a valid transaction is rejected due to over-corrective fraud prevention measures. These are a greater source of loss than fraud itself, according to Evan Bakker, an analyst at Business Insider. He stated that “…false declines are becoming a costlier problem than actual fraud — U.S. e-commerce merchants will lose $8.6 billion in falsely declined transactions in 2016, according to our estimates. This amounts to over $2 billion more than the $6.5 billion in fraud they will prevent, meaning that false declines are undermining these merchants’ ability to effectively combat fraud.”[3]

In addition, improperly implemented fraud prevention techniques at checkout can lead to cart abandonment if the experience isn’t seamless for the consumer. To solve for this, Discover offers multiple fraud prevention products to protect retailer and consumer data and help retailers avoid false declines, all while fading into the background of the purchase.

“Retailers want to provide a seamless e-commerce experience for their customers, while at the same time protecting all facets of online transactions in order to maximize their e-commerce revenue,” said Arvind Ronta, Director of Products at Discover. “To help retailers achieve a safe, seamless experience for their customers, we developed a suite of solutions that protect transactions at different stages, so retailers can have greater peace of mind and deliver a best-in-class e-commerce experience.”

When Discover delivers authentication products, they are anchored around core design principles of coverage across all access points, parity with industry standards, optionality of authentication methods, and a very low to no-friction customer experience.

“This is manifested in how we think of CNP security products,” added Ronta. “While we support emerging authentication standards such as EMVCo 3D Secure through our ProtectBuy offering, we provide optionality through our core security products for online verification and fraud alerts without disrupting customer experience.”

For example, when a customer initiates a purchase, Discover ProtectBuy, which is based on 3D Secure protocol,[4] utilizes advanced risk-based authentication to approve most transactions. For the small percentage that are challenged, customers are sent a one-time password. Once it is validated, retailers can approve the purchase.

After an order is completed, Discover Verify+ matches customer information with data on-file with Discover Card. After reviewing the information, the retailer can decide whether or not to fulfill the order.

Discover Fraud Alerts provides another level of protection; it notifies the retailer of any customer-confirmed fraudulent activity, so the retailer can cancel shipments and block any further orders from that card, reducing future losses and chargebacks.

These approaches to fraud prevention can help reduce fraudulent online transactions and the risk of losses from false positives that would keep a retailer from taking legitimate orders, as well as provide timely notification when fraudulent transactions are confirmed, giving the retailer an opportunity to limit losses.

With Discover’s approach, retailers can further enhance their e-commerce security measures, which is what Business Insider’s study concluded is a greater threat to businesses. The protection is invisible to all but a tiny fraction of consumers and helps reduce the risk of fraud.

Take a deeper dive into Discover fraud products by visiting the Discover Global Network website.

This article was brought to you by Discover Global Network. For more insights into consumer trends and the world of payments, visit .

[1] Javelin Strategy & Research, October 2014, “Fixing CNP Fraud”

[2] Javelin Strategy & Research, October 2014, “Fixing CNP Fraud”

[3] Business Insider, July 29, 2016, “The False Declines Report: The $8.6 billion problem undermining e-commerce merchants’ fraud prevention strategies”

[4] EMVCo 3D Secure 2.0 Protocol;139117398;p