Balance frictionless service and avoid financial loss with smarter payment management
Smarter payment management is all about providing security across the board. Regardless of the sector – financial services, gaming, insurance, ecommerce – the primary aim in payments is to facilitate a transfer of value between two parties. Interactions should be easy for the user, quick, and cost effective for all parties.
Simply, the payment unlocks a service or releases a good to the payer from the payee.
Let’s take two simple scenarios:
Scenario 1
- A consumer needs to make payment to attend a ticketed entertainment event.
- They access the event via a platform that supports the venue hosting an artist.
- After choosing their ticket type, they pay – from a range of options drawing on their funds or using a buy-now-pay-later (BNPL) process.
- A ticket is issued and the consumer attends the event – using a digitally issued credential to access the venue.
Scenario 2
- A consumer wants to place a bet on their favorite sporting team to win the next game.
- They access a betting platform providing odds and a chance to win money.
- They pay for a bet from their funds – coming from a bank account or card.
- The event takes place and the consumer either wins or loses – with a win, they get their return and continue to bet or take the money out to spend on other things.
- These three step processes of access, pay, and do is what happens from the perspective of consumers, or businesses, as they go about their lives or conduct commerce.
Achieving a frictionless payment experience for customers
Behind the scenes, achieving a frictionless experience for a customer requires orchestration. The access and pay stages require:
- a financial institution to confirm the funds are available
- a payment gateway for the connection between a marketplace (i.e., ticket vendor or betting app) and the consumer’s financial institution (or other method of payment choice) to move value from the payer to payee
And there is a bit of the reverse in the do – where the outcome is a good or service being provided, in return for the funds received.
Payment fraud: the vulnerabilities in payments
In each stage there are vulnerabilities, exploited by people seeking to illegally gain access to value. This is tricky to manage, and it is generally a behind-the-scenes effort from all the parties involved – and occasionally input from a consumer or business. Vulnerabilities include:
- The offer of the good or service not being real, so the consumer or business do not get what they want
- The payment is made to a payee that is not linked to the real good or service
- The consumer did not authorize the payment in the first place
- The consumer was tricked into making the payment – as they believe the offer of a good or service was true
The possibilities are complex to manage and more than likely, any party in the payment process can be deceived by a criminal seeking to make a profit from illegal activity.
Returning to our two scenarios, there is a core outcome a vendor wants to increase the chance they deal with the right person: check the customer is authorized to use the funding source to pay for their ticket or place their bet.
But linking the identity of the person to their payment method is challenging as payment authorization is not controlled by the vendor. They rely on:
- another party in the chain to help them achieve that outcome
- their own ability to examine the behavior of the consumer to highlight risks suggesting something is wrong
As such, the bank, payment provider or third party (e.g., BNPL), and the business (e.g. ticket vendor or betting app) will monitor for the risk that they, or their customer might lose the money.
Smarter payment management
Smarter payment management is broad and not just about the payment itself. Working back from the point the value is released to the payee, concepts to avoid financial losses include:
- should you intervene on a payment – to check it was authorized?
- was the behavior leading up to the payment considered normal, or were there risk indicators?
- has the payer or payee presented risk before, and should there be additional steps in the process to manage a higher chance of a financial loss occurring?
To achieve smarter payment management, the answer must include balancing the equation of creating a frictionless experience for a consumer (or business) that matches your product proposition – for example: you can create an account, fund and place a bet, and receive your winnings all within 10 minutes via your mobile device.
Why smart payment management is needed today
Professional money laundering syndicates are increasingly more sophisticated and employ a range of tactics to place illicit funds into the financial system – including the use of digital money mules opening accounts in the name of compromised identities and transacting into a web of difficult to track financial activity.
Effective controls at the onboarding of new customers do not prevent all mules opening accounts, or from procuring existing accounts to enable their financial transaction activity. This means that payment fraud can not only assist in detecting the stealing of funds, but also the movement of the proceeds of those crimes as money mules attempt to distance cyber-criminals from the source and assist in moving the funds into other countries or crypto currency.
Often these same money mules are collaborating to move the proceeds of scams on behalf of organized crime groups. Again, effective payment fraud detection and management can help stop these losses and reduce the financial profits from this activity that is commonly linked to other crimes harming individuals – for example people trafficked into scam center operations.
For those handling payments, this means playing a role in mitigating the risk of payment fraud loss to your business, your customers, and playing a role to help protect community from the prevalence of cyber-enabled financial crime threats.
The SymphonyAI approach to behavioral monitoring
SymphonyAI offers a cross-channel behavior monitoring approach to achieving smarter payments management. Anticipating deception at every turn is our mantra when it comes to the volume, speed and sophistication of fraudulent activity. We place your customers, reputation and financial outcomes as priorities when deploying enterprise-wide payment fraud detection.
- Prevent payment fraud in real-time to match the needs of customers and reduce your losses – and to do this, SymphonyAI integrates with the payment ecosystem
- Provide a holistic view of your customers via a complete picture of their interactions, payments, and behavioral data
- Intervention precision through machine learning and AI-enabled payment fraud detection
- Enterprise-wide coordination through workflow and user interfaces that are intuitive
Learn more about the SymphonyAI Payment Fraud solution.
