The digital payments landscape presents a balancing act for companies today. Consumers demand seamless, embedded, real-time transactions, and when these are not met, there is a financial penalty for businesses. In fact, a staggering 88 percent of consumers will abandon a payment process due to perceived friction. And abandonment is just part of the overall challenge, as there is an estimated $44 billion global e-commerce fraud losses in 2024 alone, fueled by sophisticated data breaches, identity theft, and account takeovers. The challenge is clear: how can companies and payment providers meet consumer demand for speed and convenience without compromising security?
The answer lies in a strategic, multi-layered approach to advanced security protocols and collaboration across the payments ecosystem. Payment networks, digital commerce enablers and financial institutions that partner with merchants to process card transactions must work together to leverage the right tools to protect transactions without slowing down the customer journey. In fact, it can make the customer experience even better.
Leverage Intelligent Tools for Proactive Protection
At the forefront of this effort are robust authentication methods. 3D Secure (3DS), for example, plays a critical role in preventing false approvals and mitigating identity theft. For merchants and acquirers, services like our J/Secure offer a streamlined pathway to enhanced security and authentication methods for online shopping.
Beyond individual transaction authentication, a deeper understanding of merchant-level risk is essential. Merchant Risk Scoring tools, provided by payment networks, are vital for assessing the trustworthiness of individual businesses. By analyzing factors such as merchant category, transaction history, and geographic location, these scores offer critical insights. This proactive approach helps acquirers identify and mitigate potential vulnerabilities before they become a fraud problem. Pre-defined blocks are also an essential tool to prevent fraud. These automated mechanisms use specific, pre-configured rules or conditions to immediately stop a transaction before it’s processed, catching fraud-attempts in real-time.
A significant leap forward in balancing security with user convenience comes from the power of artificial intelligence and machine learning. Many payment networks are now developing advanced Network Detection services, powered by AI, to conduct their own sophisticated fraud screening. This intelligence can either feed into a merchant or acquirer’s own scoring for a transaction or independently flag fraudulent activity. Designed to provide robust security that operates silently in the background, these tools minimize friction for legitimate customers.
Reducing friction while elevating security are innovations in credential protection. Network Tokenization replaces sensitive card numbers with unique, encrypted tokens, rendering actual card details unusable if intercepted. Technologies like Passkeys further enhance security by leveraging strong, phishing-resistant cryptographic credentials, reducing reliance on passwords, and enhancing the overall user experience. These innovations significantly reduce the risk of data breaches and make it harder for fraudsters to compromise payment information.
Build a Resilient and Collaborative Ecosystem
The battle against fraud also extends to post-transaction solutions. Payment networks are investing in Chargeback Prevention Programs to help merchants and acquirers proactively address disputes before they become costly chargebacks. JCB, the global payment network, is actively working on initiatives to support this crucial area.
Collective intelligence also remains a powerful weapon. Sharing Fraud Data, where legally permissible and ethically sound, allows roundtables in various countries to exchange information on new fraud schemes, emerging criminal organizations, and effective countermeasures. This collaborative intelligence empowers the entire ecosystem to adapt more quickly to evolving threats.
Beyond these global initiatives, JCB has also implemented unique countermeasures tailored to specific regions, such as its "Matte" service in Japan. This innovative approach allows for the suspension of shipments with merchants when fraud is detected, effectively blocking fraudulent use at the delivery stage. Such targeted solutions demonstrate how specific innovations can add layers of security without impacting the initial transaction experience.
Remaining committed to enabling a frictionless yet highly secure payment journey for consumers means embracing a wide range of technologies. By strategically implementing advanced security protocols – from robust authentication and AI-driven detection to tokenization and collaborative intelligence – merchants and financial institutions can successfully navigate the complex payments landscape, ensuring trust in an evolving digital ecosystem for years to come.
To learn more about how to reduce risk while increasing frictionless payments, please visit https://www.jcbusa.com/resources.
