Asset Management Digital Marketing

We are on the verge of witnessing digital payments completely disrupting traditional payment methods. Over the past few years, the demand for digital payment solutions has increased significantly.

To meet customer expectations, brands are using digital payment solutions. However, there are some challenges associated with digital payments. One of the key challenges for brands is mitigating fraud in digital payments. Malicious actors are using technology to their advantage and launching sophisticated fraud campaigns. In such a case, risk-based authentication can be used to reduce the chances of fraud.

Read on to understand the role of risk-based authentication on digital payment platforms to mitigate fraud.

Understanding digital payment platforms

Before understanding risk-based authentication, one must know about digital or online payment platforms. Brands are becoming more reliant on digital payment platforms for the past few years.

A digital payment platform is a software-based system for facilitating online transactions. It enables secure transactions via the Internet. With a digital or online payment platform, there is no need for physical currency. Brands can use these payment platforms for multiple reasons, including e-shopping and peer-to-peer online transfers.

A digital payment platform is multi-faceted with many features. Besides facilitating online payments, a digital platform also extends digital wallet facilities. Many brands offer digital wallets to their consumers for refunds, rewards, and more. Moreover, an online payment platform can accept payments via bank transfers, Credit Cards, Debit Cards, digital wallets, etc. Besides ensuring speed for online transactions, a payment platform also boosts security.

The demand for digital transactions will only increase in the future. However, malicious actors have evolved with time and started using new techniques for fraud. For the same rationale, brands implement strict security measures for online transactions.

Understanding the concept of risk-based authentication

Traditional security measures for digital platforms apply to all users. For example, an authentication technique might require all the users to enter their passcodes. After entering the passcode, a user can initiate an online transaction. However, the risk-based approach does not have the same authentication method for all users. It is a dynamic security approach with different authentication requirements for each user. It analyzes users’ financial habits to determine the level of authentication required. It will also adapt according to the level of risk associated with each user rather than using the same technique for all users.

With the help of a risk-based approach on digital payment platforms, brands can monitor certain factors. The risk-based system will analyze each user’s transaction history, location, device, and other factors. Based on these contextual factors, the risk-based system will assign a risk score to each user. Furthermore, the organization will decide on a threshold risk score, above which there might be a chance of fraud. Users with a risk score above the threshold might have to provide more authentication for digital transactions. On the other hand, users with a low score can provide only a passcode to initiate the online transaction.

Fighting fraud is a must for brands as they majorly rely on online payment platforms. If the fraudulent activity goes public, the reputation of the organizations can take a toll. Not to forget, brands can lose revenue due to fraudulent activities. With the help of a risk-based system, brands can apply a high level of security and combat fraud. For example, assume a user has a risk score above the threshold value. The user might be asked to answer security questions, enter biometric information, or more to initiate the transaction. If the user fails to provide them, security teams can determine it as a fraud attempt.

Risk-based authentication is also a user-friendly means of authentication. It balances security measures according to the threat level associated with any user. Risk-based authentication can adapt according to security threats and address high-level fraud attempts. This approach for authentication is not only limited to the financial industry. It is used by healthcare entities, e-commerce firms, and other organizations relying on online payment platforms.

Brands must choose the right provider for a risk-based authentication framework. They must ensure their risk-based authentication has additional security protocols like EMV 3DS. A reliable framework will also provide you with fraud analytics to understand the vulnerabilities of your digital payment platforms. By harnessing the power of big data, organizations can counter fraud.

Conclusion

Brands use online payment platforms in today’s digitized world. To ensure users have a seamless experience, brands must use risk-based authentication. It will allow them to apply security protocols according to the level of risk associated with each customer.

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