Building a modern payment infrastructure? Implement pre-auth risk decisioning to increase conversions

In today's rapidly evolving payments landscape, effective fraud prevention is table-stakes for maintaining healthy conversion rates and ensuring a seamless customer experience. This article explores the traditional and modern approaches to fraud risk assessments and highlights how merchants can optimize their payment processes.

Conventionally, merchants have waited until after post-issuer approval to conduct fraud risk assessments, aiming to minimize the transactions that require manual evaluation.

The implication of this is that merchants inadvertently send bad traffic to issuers, resulting in lower authorization rates, which in turn affects:

• Revenues, owing to lower conversion rates and cart abandonment.

• Customer experience, due to frustrations felt from unsuccessful payments.

• Operations, leading to higher support costs from handling refunds, chargebacks, and disputes.

Modern Approach

By moving their fraud and risk assessments to pre-authorization or before seeking issuer approval, merchants can improve conversion rates through increased issuer authorizations.

Modern payment stacks that offer pre-authorization fraud and risk assessments will also enable merchants to:

1. Offer customers differentiated payment options based on their individual fraud risk profiles.

2. Send cleaner traffic to issuers, in turn helping banks make better fraud decisions.

3. Leverage personalized consumer fraud risk data to deploy automated first-party fraud decisioning.

4. Ensure that manual decision-making for fraud prevention and refund/chargeback processing is supported with consumer-level data.

5. Optimize 3DS by integrating consumer fraud risk intelligence.

Implementation Strategy

Achieving this requires a 360 understanding of how data connects across the payments processing cycle. Here are some actionable steps to get started:

1. Integrate the new fraud prevention tools into your existing payment systems.

2. Train your payments and support teams on utilising the data effectively.

3. Continuously monitor and analyze the results to make data-driven adjustments.

Transitioning to pre-authorization fraud assessments offers merchants a robust strategy to improve authorization rates, enhance customer experiences, and streamline operations.

The Trudenty Trust Network stands ready to support payments teams, with data and know-how.

Visit our website for more information, and contact us for a chat if any of this is on your payments roadmap.