The evolution of fraud security: protecting the omnichannel ecommerce experience

In today’s digital landscape, large ecommerce merchants are constantly striving to provide seamless omnichannel experiences for their customers. However, as these experiences become more interconnected and complex, so do the risks associated with fraud. That leaves online retailers searching for ways to evolve their fraud security in ways that focus first on helping create a superior customer experience. 

The rise of omnichannel retail

Gone are the days of “online vs. in-store” shopping debates. Welcome to the age of retail fusion, where your smartphone, laptop and local store are no longer competitors, but partners in your shopping adventure. Omnichannel retail isn’t just a buzzword — it’s the pulse of modern commerce, syncing your coffee-shop browsing with your midnight mobile purchases. Sparked by tech-savvy shoppers and turbocharged by global shake-ups, this retail revolution is rewriting the rules of the game. 

The surge in omnichannel adoption is remarkable, with Harvard Business Review reporting that 73% of shoppers use multiple channels during their purchase journey. The modern consumer is truly omni-device, with a recent study finding that 67% of consumers use multiple channels to complete a single transaction.

Personalization, a key feature of successful omnichannel strategies, is proving crucial, with 80% of consumers more likely to purchase when offered personalized experiences. Looking ahead, the future of omnichannel retail looks bright, with 86% of senior-level marketers agreeing that creating a cohesive customer journey across all channels is critical to their success.

In this new era of retail, omnichannel strategies are not just meeting customer expectations – they’re exceeding them, creating experiences that are more convenient, personalized and engaging than ever before.

The growing risks in omnichannel experiences

As retailers expand their omnichannel offerings, they inadvertently create new opportunities for fraudsters. The complexity of these systems has led to a surge in fraud attempts, with the cost of fraud for U.S. retail and ecommerce merchants rising 7.3% in 2021 compared to the pre-pandemic period. Let’s discuss some of the challenges with omnichannel fraud:

The fragmented customer journey

Customers frequently switch among smartphones, tablets and computers during their shopping experience. They might browse products on their phone during a commute, compare prices on their work computer and finally complete the purchase on their tablet at home. This fragmented journey, while convenient for customers, creates potential vulnerabilities in fraud detection systems.

For example, Sarah’s new running shoes began with a late-night Instagram scroll, continued with a lunchtime price check at work and concluded with a cozy evening purchase from her sofa. Three devices, one determined shopper and a fraud system struggling to connect the dots.

The omnichannel challenge

As ecommerce expands to include more channels —  from websites and mobile apps to social media platforms and in-store kiosks — each new touchpoint introduces distinct fraud risks. Fraudsters are quick to exploit gaps and vulnerabilities specific to each channel, making it crucial for businesses to adapt their fraud prevention strategies accordingly.

For example, TechTrove, a booming electronics retailer, thought their omnichannel approach was foolproof — until fraudsters found the cracks. Mobile app credit card scams and in-store kiosk return fraud hit simultaneously, leaving the security team scrambling to plug holes in seemingly unrelated systems.

Diverse payment options, diverse risks

The rise of omnichannel retail has also led to an expansion of payment options. While this improves the customer experience, it also attracts different types of fraud. For instance, the risks associated with digital wallets (like account takeover) differ significantly from those related to traditional credit card fraud.  Signifyd’s 2023 State of Commerce report shows a 71% increase in ATO attacks in 2022.

For example, MaxMarket’s multi-channel approach backfired spectacularly. Credit card fraud hit their website, while account takeovers plagued their app’s digital wallet. One company, two channels, two security nightmares – proving that in omnichannel retail, diverse payments demand tailored protection.

Implementing next-generation fraud security

For large ecommerce merchants looking to enhance their fraud security while maintaining a superior customer experience, consider the following steps:

Leverage device and behavioral analytics 

In omnichannel retail, device and behavioral analytics are crucial for fraud prevention. These tools analyze device fingerprints and user behavior patterns, creating unique digital signatures for each customer. They detect anomalies like sudden changes in shopping habits or mismatches between typical devices and locations. This approach is vital in an omnichannel environment where customers switch between platforms, making traditional fraud detection inadequate. By leveraging these analytics, merchants can identify fraudulent activities in real time, reduce false positives and ensure a smooth experience for legitimate customers, all while strengthening their defenses against evolving fraud tactics.

Introduce swift, transparent AI

Modern fraud management demands swift, transparent AI solutions that balance speed with comprehensibility. These systems automate routine tasks, freeing teams for strategic work, while promoting cross-team analysis of complex fraud patterns. They boost confidence through extensive testing and simulation capabilities, allowing merchants to pilot strategies using historical data before implementation. Crucially, they offer the flexibility to fine-tune or override AI decisions, ensuring merchants retain control. The ideal fraud management vendor provides these features, enabling businesses to react quickly to threats, especially in omnichannel settings. These ideal solutions mean merchants can understand AI-driven decisions while maintaining oversight of their risk management processes.

Implement constantly learning and adapting technology 

Fraudsters are evolving at lightning speed, leaving traditional security measures in the dust. To combat this relentless threat, third-generation AI solutions have emerged as the new vanguard of digital security. These advanced systems employ a performance-centric approach to machine learning, continuously adapting to new fraud patterns. Through constant model operations and innovative feature engineering, they uncover hidden patterns in complex data, precisely distinguishing between legitimate and fraudulent transactions. Unlike static rules or first-gen AI, these solutions evolve in real time, staying one step ahead of fraudsters. It’s not just about more data or faster processing; it’s about agility and intelligence in the face of ever-changing threats.

Omnichannel and the need for fraud protection are here to stay

The rise of omnichannel retailing has revolutionized the way customers shop, but it has also introduced new vulnerabilities to fraud. As fraudsters continue to evolve their tactics, it’s essential for ecommerce businesses to adapt their security measures accordingly. By leveraging modern artificial intelligence/machine learning-powered fraud detection, integrating data across channels and prioritizing customer experience, businesses can protect themselves from fraud while delivering the superior service their customers deserve.

Omnichannel experiences are here to stay and so is the need for robust fraud prevention. Now is the time to evolve your ecommerce fraud security to ensure a safe and seamless shopping experience for your customers.

Photo by Getty Images

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