The Role of Fraud Risk Prevention in Reputation Management
From Fortune 500 companies on the global stage to small businesses with loyal local followings, every organization relies on their reputation, in part, to ensure continued success.
Without strong fraud risk management integrated within transactions, businesses risk damaging the reputations they’ve worked so hard to build and maintain. This can lead to lost consumer trust, negative media attention, and even declining stock value—all of which can be difficult to recover from.
Fortunately, robust fraud prevention strategies can protect a business’s reputation, ensuring consumer trust and stock value remain high.
Consumer Trust Is Invaluable
For consumers, brand trust is paramount. In fact, 73% of consumers place more value on brands that increase their sense of safety and security,1 and 75% would stop engaging with or buying from a brand if it had a cybersecurity issue.2
“A company’s brand is a critical component that helps to instill consumer confidence—and that’s something that can rapidly diminish in a digital world.”
—Kate Weiler, Director of Payment Services Risk, Discover® Financial Services
Consumer trust is damaged whenever a business experiences a fraud attack. Obviously, those with data compromised by the breach are affected, but even those who are not impacted directly often hear about the attack through traditional and social media or by word of mouth from friends and family whose data was compromised. In fact, according to a recent global consumer survey, 45% of consumers will tell others about their bad experience with a company.3
To protect consumer trust—and maintain a brand’s reputation as trustworthy—implementing fraud and risk prevention is key
Media Attention Can Present Challenges
While 21% of consumers will post to social media to share a bad experience with a company,3 traditional media can also damage a brand’s reputation. Typically, after a data breach, negative press is soon to follow. Business leaders must now contend with recovering from the attack while at the same time salvaging their brand’s reputation in the media
Unfortunately, this has become a common challenge to contend with. In a recent study, 34% of businesses surveyed reported suffering from negative press in the past 12 months as a result of fraudulent attacks.4
Strong fraud prevention strategies can stop an attack from happening in the first place—preserving consumer trust and brand reputation. Additionally, having post-incident strategies and solutions in place as a proactive measure is vitally important should the worst happen. Being able to act fast, respond to media inquiries, and reassure consumers demonstrates that the correct measures are being taken, which goes a long way toward bolstering a brand’s reputation as trustworthy, safe, and secure
Brand Reputation May Impact Stock Value
While consumer trust is precious, its exact value can be difficult to measure. Likewise, the monetary cost of losing consumer trust cannot be quantified in exact terms. Stock value, however, tells the story with hard numbers to support it—revealing the indisputable fact that brand reputation is hugely valuable.
The stock value of companies that experience fraudulent activity and data breaches has been seen to decrease. In a recent survey, 20% of respondents reported stock value decreasing because of fraud, and respondents also reported that fraud affected business growth by 51.8%.4
What’s more, companies that have experienced a data breach incident typically underperform the NASDAQ, and the impact lasts for years—with data showing that they underperform by 8.6% a year after the breach and 11.9% after two years.5
As with consumer trust, companies can take proactive measures to preserve their reputation in the stock market—and their stock value. Strong chargeback prevention and overall fraud protection that stops attacks and breaches from happening may help shield companies from long-lasting reputational damage in the stock market, ultimately preserving market value in a clear and quantifiable way
Fraud Prevention Measures Help Keep Brands in the Clear
Although consumers have great concern over security, many businesses are hesitant to install fraud measures because they want to avoid adding friction to the customer journey. In a recent survey, “Concerns about friction” was reported as the second biggest deterrent that stops companies from integrating strong fraud prevention.6
Yet, companies would do well to remember that a lack of security can also be a barrier to consumer purchase. In fact, 48% of consumers reported they’ve abandoned a cart because the website didn’t seem secure.7
Fortunately, merchants don’t have to choose between a secure checkout and a seamless one. Dynamic fraud prevention technology uses machine learning to monitor customer behavior so merchants can provide a frictionless experience for benevolent customers, reserving more cumbersome obstacles for suspicious users.8
To protect their consumers—without creating friction—merchants can adopt solutions that prevent fraudulent transactions as well as solutions that help resolve the issue if fraud does occur, such as near real-time technology that stops an attack in its tracks
One such innovation is the use of stored payment tokens, which Valeri Vanourek, Vice President of Digital Products at Discover® Network, describes as “the magic behind payments.” The process works by replacing sensitive payment data, like a customer’s primary account number (PAN), with a unique token. This token has no value on its own and cannot be used outside the merchant’s system, making it useless to attackers if intercepted. “The token protects the data in the case of a breach … because it’s meaningless to a fraudster,” she explains
Other examples of payments solutions that can help fight fraud include:
A tool that allows merchants to share real-time customer checkout information with issuers during a card-not-present (CNP) transaction. Issuers can then apply machine learning models and evaluate customer spending behaviors, helping them to make better-informed decisions.
This solution is a Three Domain Secure (3DS) customer authentication solution that validates consumer identity. If a transaction is challenged, a one-time passcode is sent to the cardholder so they can validate their identity quickly and easily, avoiding shopping cart abandonment
Provides merchants with immediate notification of confirmed fraudulent transactions, allowing them to stop order fulfillment and cancel shipments.
Fraud Is a Given, But Brands Can Protect Themselves
Fraudulent activity has become a common hazard of doing business online, but brands can avoid the damage it causes with strong fraud-prevention measures. These tools can protect both consumer information and brand reputation—ultimately preserving trust, avoiding negative media scrutiny, and maintaining stock value
- Edelman. (2023). 2023 Edelman Trust Barometer: Special Report: The Collapse of the Purchase Funnel. Accessed 24 October, 2024.
- (2023, December 18). Vercara Research: 75% of U.S.Consumers Would Stop Purchasing from a Brand if it Suffered a Cyber Incident. Vercara. Accessed 24 October, 2024
- Scutt, J., Quaadgras, T. (2024). Global Study: Consumer Feedback Channels, 2024. Qualtrics XM Institute. Accessed 24 October, 2024
- Ravelin. (2024). Global Fraud Trends: Fraud & Payments Survey 2024. Accessed 24 October, 2024
- Huang, K., Wang, X., Wei, W., & Madnick, S. (2023, May 4). The Devastating Business Impacts of a Cyber Breach. Harvard Business Review. Accessed 24 October, 2024.
- Omo-Ikerodah, L. How to use delegated authentication to reduce friction and increase checkout conversion. Ravelin. Accessed 24 October, 2024
- Barr, M. (2023, September 20). How Consumer Sentiment on Payments, Fraud, & Security Impact Consumer Experience Preferences. Radial. Accessed 24 October, 2024.
- Ioshiura, C. Murphy, A., Vancauwenberghe, M., Richardson, B., Scheurle, S., Schweikert, E., & Detura, R. (2022, November 8). A new approach to fighting fraud while enhancing customer experience. McKinsey & Company. Accessed 24 October, 2024.
The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.