1st July, 2019
E-commerce companies, including the ones from the travel sector, are gradually focusing on deploying a multi-disciplinary approach, combining different technologies (including both supervised and unsupervised machine learning) to combat fraud.
Unsupervised models don’t have clearly labelled data, while supervised models do.
As a specialist, Nethone asserts that machine learning today is letting companies deal with fraud. For instance, friendly fraud by helping discover which aspects of customers’ behaviour and transactions designate friendly fraud.
Overall, favourable results come from the ability to experiment with various machine learning-based methods, trying variations on them and testing them with a variety of data sets. It is fascinating to assess how machine learning automates the extraction of known and unknown patterns from data.
Supervised machine learning relies on historical data to predict and prevent further possibilities of fraud based on past fraud. The data set is labelled based on previous observations of fraud, and is described as either fraudulent or genuine. Unsupervised machine learning can be used to learn on the fly and identify fraudulent patterns even without having been trained with historical data, i.e. able to identify unknown fraud attacks.
Rodrigo Camacho, Chief Commercial Officer, Nethone, referred to the role of unsupervised learning in managing friendly fraud and criminal fraud. “(One) looks at the entirety of the dataset (without a label). Then cluster transactions into different bubbles. These clusters are correlated with a type of fraud, for instance, friendly fraud or criminal fraud,” said Camacho. And from here on companies can work on strategies for e-commerce, work on association with key players such as acquirers and issuers etc. for mitigating the risk.
Specialists recommend that merchants should rely on both supervised and unsupervised machine learning to comprehend both the historical patterns of use, as well as identify anomalies.
By Ritesh Gupta
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24th June, 2019
Regulations like PSD2 are paving way for new services and faster payments. PSD2 or the payment services directive in Europe is being associated with a major change in payments and data protection, and it is expected to fundamentally change the value chain.
"PSD2 is opening up the (payment) industry, and breaking the monopoly of certain players on accepting payments," said Simon Eve, Head of Travel, Trustly.
Banks are beginning to expose their data for use by third parties, in particular fintech companies, through open APIs. The use of open APIs to simplify back-and-forth messaging that takes place during the course of a transaction is coming to the fore. Other than authentication, another area to watch out for is improved security. It has to be guaranteed that data is secure, and external services have access only to the controlled data that the consumer has permitted and that the bank has assigned.
Simon, who was in Brighton, UK, for Ai’s ATPS (13th ATPS Worldwide Event), added that the fintech sector is looking at offering instant, real-time bank transfer to airlines.
Simon spoke in detail about the payment-related complexity and how the same is being taken care of when it came to dealing with multiple players, how airlines today are in a position to localize their payment options in a region like Europe, fraud prevention etc.
By Ritesh Gupta
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7th June, 2019
Ai Editorial: CyberSource has highlighted that effective fraud management requires the careful balance of three interdependent dimensions, reports Ai’s Ritesh Gupta
Payment and fraud executives have to be crafty enough to ensure that genuine customers aren’t denied an opportunity to complete a transaction or even face hiccups with added friction. At the same time, merchants can’t afford to be a victim of fraud owing to weak authentication or fraud prevention mechanism.
CyberSource, in its latest report – the 2019 Global eCommerce Fraud Management Report Asia Pacific Edition, has highlighted that effective fraud management requires the careful balance of three interdependent dimensions –
· Delivering a positive experience for genuine customers and maximising the acceptance of genuine orders - The balancing act, as highlighted by Ai previously, is about being proficient in validating a buyer and such verification shouldn’t interrupt the manner in which they interact and transact with a business. Merchants need to look at new regulations, what sort of action is required and its impact on the user experience, and also the flexibility of consumes when it comes to additional measures that are being taken for authentication. One way to differentiate between transactions is the risk associated with them.
· Accurately detecting and rejecting fraudulent orders to minimise fraud losses - Merchants need to leverage the prowess of data-driven, artificial-intelligence powered offerings for combatting fraud. Rules-based systems are in general reactive and probabilistic solutions, which is why they are unable to prevent fraud before it happens. Rather than using a blanket rule that forces every user to login with 2FA, real-time surveillance can be used to assess logins in the background, and only logins with borderline risks expected to go through 2FA. Merchants should still develop their own fraud tools that are able to tap on their own sources of data for greater efficiency and more accurate detection of fraud.
Real-time machine learning can help against blanket blacklists and whitelists by focusing on the customer’s behaviour instead. It works with real-time live data collected on the merchant’s website, where the system trains itself with each incoming transactions to identify fraud patterns instead. Deploying a multidisciplinary approach combining different technologies - both supervised and unsupervised machine learning - would better equip merchants for fraud management. Unsupervised machine learning can be used to learn on the fly and identify fraudulent patterns even without having been trained with historical data, i.e. able to identify unknown fraud attacks. Thereafter, predictive analytics may still be used to run the probabilities of fraud, giving a risk score.
CyberSource indicated that in particular, enterprise organisations tend to more proactive with their fraud strategies because the financial and reputational ramifications of fraud can be far reaching.
· Efficiently managing the operational costs of fraud management activities – The report also shared that as in other regions, minimising operational costs is generally a lower priority for businesses in Asia Pacific.
The report also highlights that it takes “constant recalibration and fine-tuning of fraud management controls and processes to keep achieving the best balance”.
6 characteristics of the masters of balance, according CyberSource:
1. Have a lower chargeback rate
2. Are more likely to rate ecommerce fraud management as extremely important to their business strategy
3. Find it less challenging to respond to emerging fraud attacks
4. Have a greater range of capabilities that give them agility to respond to the dynamic landscape they operate in
5. Have a greater capability to use data effectively for fraud management
6. Are less likely to conduct manual review, and spend less in this area
Hear from senior executives about the balancing act at the 8th Annual ATPS Asia-Pacific to be held in Penang, Malaysia (27-29 August, 2019).
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4th June, 2019
Ai Editorial: 3DS 2.0 promises to combat fraudulent online transactions, but merchants need to cut down the possibility of losing out payments when authenticated using the new version of 3DS, writes Ai’s Ritesh Gupta
Transition to the new version of 3D Secure is being followed closely, owing to its impact on the shopping experience and in improving security of a transaction.
More so for high-risk transactions or in a market like Europe as the PSD2 introduces strict security requirements for the initiation and processing of electronic payments, which apply to all payment service providers. In Europe, organizations are expected to upgrade to the new version by September 2019, to be ready for the enforcement of the SCA or Strong Customer Authentication. Since this directive mandates changes in how fraud review must be conducted on intra-EU transactions, critical issues such as cart abandonment need to be evaluated in detail. The SCA aspect of the PSD2 directive can have negative impact on revenue generation, and this is what the stakeholders are concerned about.
It is being highlighted that 3-D Secure 2.0 will pave way for a real-time, protected, details-sharing channel that merchants can avail to send an unmatched number of transaction attributes that the issuer can use without looking for a static password. One of the highlights of 3DS 2.0 is data sharing. This data exchange is relatively richer owing to the combination of certified SDKs in the checkout flow, paired with data sharing APIs. Authorization rates can be stepped up with no perceivable alteration to the checkout flow.
Subject to the sort of data being provided by merchants and their respective payment services providers, the issuer is expected to act in a couple of ways to decide on the course of action related to the payment. In case, the information provided is considered to be apt to assess the authenticity of the buyer, then the particular transaction is eligible for a frictionless flow, and authentication isn’t interrupted from a shopper’s perspective. In case the transaction isn’t in line with the normal purchasing pattern, then it ends with what is being called a challenge flow. Accordingly, a requirement crops where one-time password from the buyer is needed to authenticate the payment. This is where the efficacy of the new version comes in, as the challenge flow is blended into the mobile checkout experience without redirects. Visa states that merchants can embed 3DS 2.0 into a web page or native application. One can customize the user interface elements (e.g., buttons, fonts, inputs) for all content for any challenge method used. The mobile SDKs will set up flows within apps. This indicates that a shopper won’t be required to finish the payment in a separate browser-based flow.
Assessing the impact
Merchants need to be alert about the fact that a refined 3DS 2 user experience alone won’t pave way for optimal acceptance rate. Merchants need to be clear about which transactions require authentication and which don’t.
Rodrigo Camacho, Chief Commercial Officer, Nethone, says merchants shouldn’t push 3DS for all transactions.
“At Nethone we have found that 3DS typically costs merchants anywhere between 2% and 3.5% in conversion rates in Europe and upwards of 15% in the Americas,” mentioned Camacho in a company’s blog post. “Typically we have seen that it’s only necessary to push 3DS to less than 8% of your traffic which will lower the impact on your conversion rates by more than 90%.”
According to another analysis, Ravelin’s data indicated that 3DS with improved user experience still lost 19% of payments.
When customers are asked to verify transactions, they are presented with a challenge flow. The challenge method that's used is determined by the issuer.
Visa’s recommends 3 UX principles:
As explained by Visa, three verification methods are as follows:
Also, a customer's purchase can be verified on the existing issuer app by entering sign-in credentials. Visa also states that since many iOS and Android users already have the ability to use fingerprint scanning to access their phones, it recommends using the same method to authenticate customers. Also, the team advises any biometric authentication is used in addition to a passcode. So if biometric authentication issues arise, the customer may switch to a passcode. Other methods of authentication are face recognition and voice recognition, which can be done directly via issuer app or via a connected device linked to an issuer app, such as a digital watch.
Other than UX, there are technical details that also come into play. According to Adyen, these are the front-end libraries (to securely collect and transmit device information, as well as to display authentication flows) and the 3D Secure server. Both work together to exchange information and request authentication.
What to expect
Sasha Pons, Product Director at Ingenico believes that the deployment of the new version of 3DS is going to be an iterative process, shaping up as version 2.1, version 2.2 and so on.
“Such a huge shift in the way merchants collect and share data will not happen overnight. There will be a period of adjustment, and you can take some comfort in the fact that many merchants like you will be going through the same thing,” Pons mentioned in a recent blog post. “What 3DS v2 asks of merchants will change as the practical realities of the new standard become clearer.”
He expects the particular rules around the format, and quality of data needed will evolve as the time progresses.
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30th May, 2019
Ai Editorial: As consumers look to control their digital experiences, the ease with which one can complete a transaction in a secure environment is extremely important. Ai’s Ritesh Gupta assesses how open APIs are playing their part in this context.
Real-time payments and open banking, along with the opening up of customer banking data to 3rd parties and streamlining of digital payments via regulatory measures, are the main trends that are shaping up the future of digital payments.
Regulations like PSD2 are paving way for new services and faster payments. A lot of areas are being probed today, and one of them includes how open access and application programming interfaces (APIs) are going to impact real-time payments. Are individual banks going to make their data available through different technical standards or a regulation is going to pave way for common API standards in a certain market? Importantly, with open APIs and the implementation of payment hubs, there is going to be support for new networks and hence there will be competition for existing rails.
There are multiple ways in which APIs are playing their part:
“Open APIs are all about consolidation of data and processes that sit in different domains and systems. On one side there is more data than ever that helps to understand the context of the payment and on the other, once decisions on purchase are made – one can execute them easily across multiple platforms since they are connected,” mentioned Vojin Rakonjac, Head of Payment Solutions, Voyego.
“Devices or systems that are connected to these open APIs (no matter if it is chatbot or voice conversational agent/ banking chatbot or Siri) will learn more about our decisions and ultimately “know” what we want at a given time and their job is to understand the intent and automate most of the process in the backend so it looks seamless to the end user. There is a great example from Google’s assistant where haircut appointment is booked by voice. Assistant talks in human voice and negotiates timeslot with the local barber shop while on the other side of the line is real person. We should expect things to move in this direction more as long as device knows what are the boundaries that it can work with (time slot, budget etc.) and as long as payments are always performed with proper authentication,” added Rakonjac.
Going forward one area to watch out for is standards and guidelines for open APIs. This is going to be the deciding factor in the effort required for collaboration or integration.
Considering that in a region like Europe it is becoming mandatory for banks to open up access to accounts, payment flows and end-customer data to 3rd parties, it is vital for the industry to dig deeper. All these developments are going to impact banks, as the rising role of APIs in retail banking is considered to be a recent phenomenon. Banks are beginning to expose their data for use by third parties, in particular fintech companies, through open APIs. APIs enable banks to expose their in-house data and application functionality to approved apps and services, while monitoring and controlling the flow of data. And by allowing for new digital experiences on mobile apps, 3rd party services etc., banks are potentially opening up to risks, for instance, fintech firms tapping into a bank’s financial data.
“With PSD2 we have banks aggregating a lot of data and opening their APIs so some of this data is available to 3rd parties (transactional, account data etc.). But banks are not using it to the full potential. Banks worry about loans/ credit cards it could offer – where they are sitting on top of data that would be very valuable for merchants or fintech’s and where this context can be fully utilized,” said Rakonjac. He expects innovation/ services around this space where data collected by banks is not used only for risk scoring (3DS 2) but is provided to the other companies where it can provide real benefit to the consumers.
“We already have aggregators that link into European banks and leveraging PSD2 (e.g. Figo). But, as digital identity advances and becomes more mainstream, we might have companies that will aggregate one’s account details for all of the payment methods. This way you will no longer need to have separate credentials or authentication mechanisms but only one. By doing so, customers won’t have to distinguish between payment methods – there would be only one option, Pay. To the customer, we are going towards one payment and one commerce – there will be no difference between physical store and e-commerce and there will be only one pay option.”
Other than authentication, another area to watch out for is improved security. It has to be guaranteed that data is secure, and external services have access only to the controlled data that the consumer has permitted and that the bank has assigned.
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28th May, 2019
Merchants, including ones from the travel e-commerce sector, need to diligently assess their respective mobile-order fraud-review systems.
According to Riskified, the behaviour of consumers when they shop via mobile and what makes such devices risky has to be ascertained. If not then merchants would continue to grapple with the highest rate of cart abandonment during the checkout process and above-average false-decline rates when compared to other shopping channels.
Sophia Miller, Business Development Manager, Riskified, who was recently in Brighton, UK for Ai’s ATPS (13th ATPS Worldwide Event), underlined that nature of users, the kind of transactions, unsuited fraud review measures, and the device being ATO or account takeover friendly make mobile risky.
For instance, Sophia highlighted that relatively younger travellers are more likely to order travel products using mobile devices, and tickets booked by this audience are 3.5 times more likely to result in a chargeback. She also shared that last minute travel orders are riskier plus mobile orders provide data points that don’t exist in desktop orders (and vice versa). “Fraud measures that are not device-sensitive can lead to 50% drop off rates,” indicated Sophia. As for ATO, she mentioned that mobile devices tend to contain all account, payment information and rewards and mobile apps are a “fraudster’s gold mine”.
By Ritesh Gupta
24th May, 2019
Merchants, including airlines, need to take a collaborative route to combat fraudulent activities such as financial fraud, account takeovers etc.
Jan-Jaap Kramer, Founder and CEO of FraudGuard highlighted the same during an interaction with Christopher Staab, Managing Partner, Ai Conferences at the 13th edition of Airline & Travel Payments Summit (ATPS) in Brighton, UK, held earlier this month.
“I believe in collaboration (for fighting fraud) at every level,” said Kramer. He indicated that fraud prevention as a discipline has come a long way, considering that a fraud analyst used to be isolated from other departments within an airline. And now various sectors have realized the significance of jointly fighting fraud since one fraudster can have access to a customer’s credentials. And these can be used across a variety of retail sites or in other ways to commit a fraudulent activity. “So it is imperative for merchants to cooperate and fight in unison,” said Kramer.
No point in just passing the fraud liability to another company or garnering data to enable real-time risk assessment but just for one’s own benefit. Rather wherever organizations can share best practices and even data they shouldn’t restrict and go for a join effort to fight this complex problem. This way merchants would be better aware of live and recent fraud transactions, chargeback monitoring, what to do when fraud is identified etc.
20th May, 2019
Voice commerce is transforming the way travellers search, browse and buy online.
Travel brands have been focusing on the utility of voice features/ assistants, keenly evaluating those aspects of a trip that are tedious, and how can voice make the experience better.
“We have witnessed great advancement in the manner in which one can communicate with voice assistants, their context being understood and being helped out (in various tasks),” said Rodrigo Sánchez Prandi, VP Product, dLocal, who added that the e-commerce sector is witnessing progress on the payments side, too. So from checking the status of a flight to amenities in a particular flight such as Wi-Fi to checking in etc., one can buy trip essentials as well.
Companies like Google acknowledge that designing conversations is quite tricky as human conversations are complicated.
Prandi fittingly referred to the significance of understanding the specific use case of voice search, and counting on contextualization to deliver the best possible experience. “If a traveller is looking for Madrid to London flight, it is important to come up with only a couple of options, rather than giving a user 20 options. There is a need to know the customer really well,” he said. Progress is rapid owing to the fact that these offerings are always getting smarter, delivering new capabilities. The more one uses Alexa or Google Assistant, the more they adapt to a speech type/ pattern, lexicon/ jargon, likings etc.
Some of the considerations that travel e-commerce need to dwell upon:
• Creating a specific voice app like capitalizing on Alexa skills
• Difference between direct voice buys and open-ended voice searches
• Streamlining UX (for instance, Amazon Alexa recommends that enable users to initiate checkout on the website or mobile app, and complete the purchase via Alexa, or vice versa)
13th May, 2019
PSD2 or the payment services directive in Europe is being associated with a major change in payments and data protection. It is aimed at regulating payment collection and payment services in the EU and EEA. The PSD2 legislation came into effect last year, with full operational compliance to technical standards required by September this year.
It is a challenging phase for the entire payment ecosystem, says Laurie Gablehouse, Global Head of Travel Solutions, Ingenico ePayments, who was in Brighton, UK last week for Ai’s ATPS (13th ATPS Worldwide Event).
Laurie pointed out that the standards are still evolving, with grasp over “80% - 90% of what needs to happen”. “(So) the timing is quite late from a technical perspective for everybody to be ready by September.” She recommended that merchants, including airlines, need to assess where this directive is going to be applicable and accordingly, what are the requirements for the SCA (Strong Customer Authentication). The SCA requirement is for transactions between cardholders whose payment cards have been issued in the EEA and merchants located in the EEA. Exemptions include low value payments at the point of sale (to facilitate the use of mobile and contactless payments).
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8th May, 2019
Aer Lingus recently chose to implement the Apple Pay solution on its mobile app. This payment offering was delivered as a part of the airline's new payments hub platform. Ai's Ritesh Gupta assesses how Aer Lingus is strengthening its infrastructure.
Consumers are being offered the option to shop via vocal assistants, tapping of their phones, QR codes...the list of new options is enticing. Technology is increasingly making it simple for shoppers to wrap up their tasks. To make the shopping experience complete, retailers are also looking at secure payment acceptance.
In an era where the number of ways in which a customer can pay has risen tremendously, facilitating such a wide variety of payment methods can be an arduous task for airlines.
But airlines can't fall behind when it comes to embracing such trends in retail and commerce. A shopper doesn't differentiate between any product category. So be it for grocery, books or travel, they expect a similar experience. But a key question here is - are airlines nimble enough to facilitate a transaction via a mobile wallet in a specific market and or a new alternative form of payment?
"Airlines can’t easily support new payment methods because of the complexities of the systems while legacy systems are lacking robustness that would enable quick adoption of new payment methods," said Vojin Rakonjac, Head of Payment Solutions, Voyego.
Rakonjac asserted that there are several reasons behind airlines' lackadaisical approach when it comes to accepting new payment methods. It is owing to not aptly comprehending a shopper's expectations, not keeping pace with the current trends in mobile commerce/ e-commerce, and lack of technology readiness.
"Unlike other online merchants, airlines have a lot more systems and each performs its core tasks (inventory management, PSS, Reconciliation tools etc.) but there is no dedicated payment system," said Rakonjac. He further explained: to make things worse, not all of the airlines systems are owned by the airline, so there are many 3rd party vendors to deal with. Because of this complexity, when airlines intends to introduce a new payment method, they need to change a lot of internal systems to accommodate for the data/ flows that are specific to that new payment method. This requires a lot of synchronization with internal departments and 3rd party vendors, and a lot of time and resources to add a new payment method.
"As long as there is no dedicated payment system that is taking on the complexities of the payments, there cannot be an agile environment – because all the systems are impacted," said Rakonjac.
Setting up a robust payment infrastructure
Selling an itinerary featuring multiple destinations or cancelling the same tends to be a complicated scenario for airlines. And this does have its repercussions on the payment side as well.
Rakonjac acknowledged the same and mentioned that payments in airlines are a bit more complex than in other industries.
He said, "For example, if you are buying a book, worst that can happen is that you can issue a refund. With airline it is not that simple. When you go to airlines website, you can: make a booking, manage booking (and change a contents of your basket many times between then and departure (which can be one year from then and even make payments on Check-In (and still refund at the end if needed). So, for starters, payments in airlines are more complex than what you would find with typical merchant."
He further added, "However, the biggest issue is not in the complexity of payments, but rather in the complexity of the systems. In order to create a robust payments infrastructure, you will need to make sure that each of the airline systems performs its core competency and to dedicate a single system that will perform payment-related activities. Currently, because there is usually a lack of dedicated payment system, all of the systems in airlines infrastructure contribute to payment-related processes in one way or another."
To make robust payment infrastructure, dedicated payment system is required. This system needs to cater for all the channels (web, mobile, kiosk, PoS, chatbot, voice etc.) as well as for all the business processes (call centers, airport operations, revenue accounting etc.).
"Once you release rest of the systems from payment-related activities and delegate it to one system, all of the channels and processes can work on top of the same data making it consistent. Once change is needed, you make that change in one system and they are instantly available to everyone," said Rakonjac.
While infrastructure is important, it is just one piece of the puzzle. A tailored payment infrastructure and the structuring of team internally, where multiple teams working in sync within an agile environment, paves way for payment optimization.
Learning from Aer Lingus
Aer Lingus recently launched Apple Pay as a payment method on the Aer Lingus mobile app.
Sharing the experience on working with the airline, Rakonjac said, "Aer Lingus wants to lead in innovation when it comes to payments and follow the latest trends, so they bring more value to their customers. In order to do so, there were number of challenges to overcome in order to make a robust and future-proof system."
He added, "Firstly, it has to be made sure that one is not building a system that will cater for one payment method only – but rather think a bit into the future and predict possible scenarios. Secondly, one cannot overlook requirements of different departments. Knowing payments is one thing, but without knowing airline specific scenarios and needs of every department is completely different. Then, you don’t want to build a system that will be limited to a single PSP but to have a flexibility to work with any PSP if airline wishes to do so with minimum changes (and in some cases, you want to integrate directly with a specific Payment Method)."
Rakonjac also recommended dos and don'ts for introducing digital wallets or any new payment method:
Vojin Rakonjac, Head of Payment Solutions, Voyego is scheduled to speak at the ATPS about how airlines can transform the overall payment experience with their current infrastructure on 10th May, 2019.
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