Businesses are having difficulty safeguarding their payment transactions from fraudulent activities and getting to the root cause of their payment challenges. As digital transactions become more prevalent, merchants need to stay ahead in the fight against fraud by leveraging AI-powered tools that help them tackle the issue head-on.
Visa has been working with more than 8,000 financial institutions globally to help identify and prevent fraud. Through its Merchant Risk Intelligence Suite (VMRI), the company is leveraging advanced analytics and data to help merchants authorize secure transactions and make more informed decisions while handling disputes.
VMRI lets merchants analyze their transaction data against industry benchmarks and pinpoint where they excel and where they fall short. The service also provides helpful metrics, including authorization rates and fraud rates. With these valuable insights, businesses that route their transactions to Visa can improve their operations, resulting in increased approval rates, reduced fraud rates, and, ultimately, boost transaction activity and profits.
The Value of the Right Analytics
Through VMRI, merchants can see how they stack up against their peers, specifically in terms of authorization rates, fraud rates, and other indicators. Merchants who route their transactions through Visa reap the full benefits of VMRI by identifying areas where they are underperforming or overperforming, allowing them to take targeted actions to improve their operations.
A case study from one digital merchant in particular shows how impactful these tools can be. Prior to using VRMI, the business was experiencing high fraud and chargeback rates, which led to higher representment rates. Representment, in this context, refers to the process where merchants dispute chargebacks by providing evidence to card issuers to reclaim lost funds and counter unjustified chargebacks. According to Visa, this essentially made the merchant appear less trustworthy—riskier—in the eyes of issuing banks, which approved fewer of its transactions, rejecting most of them with “suspected fraud” and “do not honor” codes.
Because of the various moving parts, it was unclear to the merchant how big its problems were compared with those of other companies and how it should proceed. After deploying VMRI, the merchant identified that it had weak authentication practices and an ineffective representment approach that was not up to the industry standard. After working to fix the issues by intensifying authentication practices and refining its re-presentment strategy, the merchant saw remarkable results, including a 10% improvement in transaction approval rates, a 30% reduction in fraud rates, and decreased representment rates.
How Risk Intelligence Tools Drive Transaction Authorization
Although Visa’s Merchant Risk Intelligence Suite is helpful in taking stock of how a business is doing over a long period, it doesn’t detect individual fraudulent transactions in real time. To help with that particular challenge, Visa provides Visa Advanced Authorization (VAA), a comprehensive risk management tool that monitors and evaluates card-not-present transaction authorizations on its global payment network in real time.
VAA identifies instances where hackers might be trying to guess account numbers, expiration dates, or security codes—a process known as account enumeration. It then categorizes its findings into alerts and reports that identify the most sophisticated attacks and their victims, and it shares the information with its partners. All Visa issuers get the VAA score that helps them better identify fraud and decline those transactions, saving the merchant from potential losses.
In addition to VAA, Visa’s Cybersource Decision Manager and CardinalCommerce authentication solutions also help merchants mitigate fraud. Decision Manager’s machine learning capabilities combine automated strategy suggestions with a “what if” testing environment to help merchants optimize their fraud strategy. Meanwhile, CardinalCommerce works at the center of a vast exchange that includes both merchants and issuers, giving unique visibility into the full payment lifecycle to help create smart authentication solutions.
In an interview with The Edge, Dustin White, Chief Risk Data Officer at Visa, explained how these tools are already helping to combat fraud. According to White, fraudsters make more than two million daily attempts, but fraud rates currently impact only 7 cents per $100 in merchant transactions. White credited this to Visa’s hefty investments in advanced analytics and artificial intelligence.
Avoiding E-Skimming
Skimming, and electronic skimming in particular, has become more common—and it is another growing challenge that many merchants face. To better help merchants deal with it, Visa rolled introduced its eCommerce Threat Disruption (eTD) service, a system that analyzes merchant websites for malware that skims payment data and is available to merchants who route their transactions to Visa. Once a potential compromise is identified, Visa provides guidance on how to remove the malware, limiting the amount of time a merchant is compromised.
In one instance, the Visa team that handles payment fraud got a tip about a possible security breach of a restaurant’s online ordering system. Hidden in a file that seemed legitimate, Visa discovered malicious software designed to steal payment data. The file was not on the restaurant’s website but on the website of the service provider that handled its online orders. Using eTD, Visa looked into other businesses using the same service provider and found that the problem was much bigger than just one restaurant; it affected one-third of all businesses using that specific service provider.
With information from Visa, the service provider found and removed the malicious software within a week, potentially saving businesses up to $141 million.
Conclusion
Visa’s advanced analytics solutions, including the Visa Merchant Risk Intelligence Suite, Visa Advanced Authorization, and eCommerce Threat Disruption, offer tangible benefits to merchants seeking to enhance their operations and profitability. Merchants who route their transactions to Visa get all the benefits of these tools, empowering businesses to not only identify areas of improvement but also proactively address challenges in real time.
Through VMRI, merchants gain valuable insights by benchmarking their performance against industry standards, enabling them to make targeted improvements. A case study showcased how this approach led to significant enhancements in approval rates and fraud reduction, transforming a struggling merchant into an industry-standard performer.
Visa’s VAA leverages AI to detect and prevent fraudulent transactions in real time, offering businesses a robust defense against sophisticated attacks. Additionally, Visa’s eTD system acts proactively to identify and eliminate malware that skims payment data, safeguarding businesses from potential compromises.
By routing their transactions through Visa and taking advantage of these solutions, businesses can help optimize their operations, increase transaction activity, and ultimately increase profits.