The business demand for fraud protection is growing year on year, with 63% of businesses having experienced the same or more fraud losses in the past 12 months. Fraud has many disguises within business from free-trial abuse to fake product reviews to account takeovers and current fraud protect offerings seem to fall short. This leads to eroding the customer relationship with wrongful rejections and slow payment authorisation which in turn encourages many customers to abandon their cart. So what can be done about it? Microsoft is no stranger to retail fraud and initially needed to come up with an internal solution. They did this by introducing their own fraud protection system, reducing fraud-related costs by $76 million and boosting revenue by hundreds of millions more over a two-year period. Microsoft Dynamics 365 Fraud Protection Tool uses innovative AI technology and real-time fraud pattern detection. Throughout this blog, I will take a deeper dive into the tool and the benefits of having it.
In 2020, the worldwide online retail market will be worth almost $4 trillion, with an annual growth rate above 19% (Worldwide Retail and Ecommerce Sales: eMarketer’s Estimates for 2016–2021). As e-commerce is on the rise so is fraud. The online sales industry currently loses more than $250 billion in annual costs from fraudulent transactions (LexisNexis®Risk Solutions 2018 True Cost of Fraud℠ Study Retail Edition, October 2017).
As a top e-commerce merchant with more than 1 billion transactions a year across online stores, cloud services, subscriptions, and other channels, Microsoft is a big part of the online retail industry—with its own share of fraud challenges. Each year, Microsoft safeguards its online retail operations against more than $1 billion in attempted fraud.
Microsoft combined its online retail experience with their technology expertise to build an advanced fraud protection system to originally being used internally. After developing, testing, and running the system to prove its value, Microsoft released Microsoft Dynamics 365 Fraud Protection for public preview in April 2019. Now all online retailers can use Dynamics 365 Fraud Protection to help reduce fraud and its related costs, increase revenue, and deliver better buying experiences with lower friction and more support.
Like all other online retailers, Microsoft needed to stop fraudulent activity without rejecting legitimate purchases or discouraging buyers with friction in the purchasing experience. Across e-commerce, up to 20% of genuine transactions get rejected, which often leads to lost revenue. Microsoft wanted to decrease fraud-related costs and protect online revenue with better detection, higher acceptance, and seamless transactions.
With more agility, Microsoft uses the system to quickly identify the fraud protection it needs, apply adaptive AI to the millions of decisions necessary, and put content providers at ease. Product teams can now run bigger launches with the least buying friction necessary, reject fewer legitimate transactions, and still protect high-growth offerings from fraud.
Between 2016 and 2018, Microsoft used its fraud protection system to reduce false positives and increase bank acceptance, increasing revenue by almost 10%. By reducing fraud losses and its manual review rate, the company saved more than $76 million in operational expenditure costs.
In e-commerce, the impact of fraud is spread across consumers, merchants, online retail networks, and issuing banks. The market won’t tolerate high fraud rates in a competitive e-commerce landscape, and today’s online buyers expect seamless transactions. Customers will remember if an online merchant rejects their genuine purchase or has a negative buying experience. The goal for online merchants is to decrease fraud losses but to increase acceptance rates so that customers don’t end up abandoning purchases.
E-commerce networks and issuing banks earn their fees per each transaction, so to promote high volume, they need environments that consumers and merchants trust. But like consumers and merchants, they dislike anything that interrupts the flow of transactions. Microsoft has equipped Fraud Protection with unique, advanced AI and other digital capabilities to help online merchants build trust, streamline transactions, and amplify their fraud protection activities.
With Dynamics 365 Fraud Protection, fraud managers optimize protection controls with specialized AI technology that continuously adapts based on real-time learning from the processed datasets. They can use connected knowledge tools in Fraud Protection to build broad awareness of fraud activity across the globe, while always safeguarding confidential information and shoppers’ privacy. By sharing transactional trust knowledge with issuing banks, merchants can help boost authorization rates.
Fraud is an ongoing problem for the e-commerce industry and significantly impacts customers who increasingly rely on online shopping. But with Fraud Protection, the retailers, networks, and banks that support e-commerce will find it easier to safeguard against fraud, protect revenue, and still drive growth by delivering the seamless transactions that consumers expect.