Like so many technologies in the fraud prevention realm, third-party fraud prevention platforms have come a long way since their inception. They’ve offered protection and flexibility to not only prevent fraudulent transactions but to also increase acceptance of legitimate orders. They continue to help organizations scale their fraud teams by managing—or helping to eliminate—the manual requirement associated with transactional order review. Often, at the foundation of the prevention platform is a customizable rules engine with an artificial intelligence layer designed and maintained to identify historically high-risk combinations of order attributes. It then makes an “accept,” “reject,” or “review” decision on behalf of the merchant.
Over the last decade, we have witnessed the evolution of such providers from a simpler platform through which retailers can manage decision rules and manual reviews to more of a “one-stop shop” for all (or at least most) things fraud mitigation tech-related. This evolution offers more end-to-end options under one umbrella. The evolution has come primarily in two forms.
1. Acquisition: We’ve seen a number of large, well known brands acquiring complementary platforms to bolster their fraud mitigation functionality. Major credit card brands have been quite busy in this regard. Acquisition examples include the Visa acquisition of Cybersource, Cardinal, and Verifi—and the Mastercard Aqcuisition of NuData, and Ethoca, as well as the AMEX acquisition of Accertify and Inauth. Payment service providers have also gotten involved with the acquisition of Retail Decisions (RED) by ACI. Finally, the consumer credit agency Transunion has pieced together full platform with the recent acquisition of Iovation.
In this scenario, we have seen a wide range of integration levels, with some technologies remaining relatively independent and others being fully absorbed and fully integrated into the offering. End users have the ability to take advantage of existing integrations with the primary platforms through activation of these secondary services and technologies as they are acquired, with little to no additional integration needed.
2. Partnership: This is a looser integration alternative to acquisition, and still allows end users the advantages of boosted service offerings with little to no additional integration. In these instances, (primarily) third-party identity data providers partner with a number of (in many cases) competing platform partners to offer enhanced identity verification options to clients of those platforms. The partnership typically involves the creation of API calls between various technology providers. Existing platform users can then take advantage of these enhancements by simply “activating” those additional functions through the platform.
In this scenario, merchants and financial institutions can fully integrate this enhanced data to further enrich their existing rules and models. In addition, or alternatively, users who operate some level of manual review can include individual call outs to these secondary service providers for further verification of individuals interacting with in their digital environment.
While the scenarios above are some of the most common, additional integration layers have been created based on the platform service combination. Other common layers and platform enhancements include:
- Orchestration platforms
- Device ID / reputation
- Behavioral biometrics
- Chargeback management platform
- Consolidated reporting options
We will continue to monitor these fraud platform providers as they evolve and enhance service offerings for end users. In the meantime, we recommend that existing and potential clients continue to drive the conversation around what support and services are required to fill risk-based business needs.
In our 2020 edition of the Paladin Vendor Report, we featured a number of solution providers offering fraud platform solutions, including:
The 2020 Paladin Vendor Report not only covers fraud platform technologies—it also spans the full spectrum of current technology and solutions in the fraud prevention landscape today. Download the full Paladin Vendor Report here: http://paladinfraud.com/mrc-trends-2020/ And stay tuned for upcoming posts highlighting even more fraud-fighting technologies that organizations are turning to today.
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