Fraud-Prevention Services Can Aid Merchant Retention, a Survey Finds

What impact can fraud-prevention services have on merchant retention? Apparently, quite a bit, finds the “State of Payment Processing & Fraud: 2018 Report” from Kount Inc.

Kount, a Boise, Idaho-based risk-management technology provider, found that 75% of approximately 150 payment-processor respondents say offering fraud-control tools improved merchant retention. The high mark went to offering identity data tools and services at 100%, followed by integrated fraud rules and scoring at 86%. Other value-add services that boosted retention include cross-border payment acceptance, 83%, and shopping cart or checkout optimization, 77%.

“Regardless of which value-added services they support, payment-industry companies were asked whether doing so has made it easier to attract new processing clients and if it has improved retention,” the report notes. “Results from The State of Payment Processing & Fraud Survey were overwhelmingly positive.”

Overall, 53% of respondents said they offer fraud technology tools as value-add services. But, reporting and business analytics services are offered by 65%, followed by mobile and alternative payment types, 55%, jumping to integrated fraud rules and scoring, 48%, and cross-border payment acceptance, 43%.

Eighty-seven percent said they offer at least two value-add services and 74% say they offer three or more. Only 54% said they provide four or more.

Gateways and payment facilitators were more likely to offer value-add services in most instances. Seventy-two percent of gateways and payfacs offer reporting and business analytics tools, compared with 59% of merchant acquirers and processors. For mobile and alternative payments types the breakdown is 67% and 45%, respectively. 

For fraud technology tools, 56% of gateways and payfacs offer them while 50% of acquirers and processors do. Many more—56%—gateways and payfacs offer integrated fraud rules and scoring than acquirers and processors—41%.

These differences may not remain, however, as many plan to increase their support. Indeed, 90% plan to increase their support for mobile and alternative payments types. Reporting and business analytics, at 81%, is the next priority, followed by integrated fraud rules and scoring, at 75%. Supporting marketplaces, 70%, and shopping cart or checkout optimization, 69%, round out the top five.

Respondents also disclosed their most worrisome merchant fraud risks. At the top of the “very concerned” list is card-not-present fraud at 63%. Tied at 34% is merchant risk underwriting and merchants with excessive chargebacks. The impact of friendly fraud on merchants came in at 28%, followed by check fraud and card present fraud, each at 9%.

Kount developed the report with The Fraud Practice, a Palm Harbor, Fla.-based e-commerce and fraud consultancy.