Financial losses are the most talked about and feared impact of fraud. This attitude towards online and banking fraud fails to recognise the greater impacts of fraud on individuals, businesses and financial institutions. Online fraud has far-reaching consequences that can put banks, companies, retailers and customers at risk.
In order to mitigate the growing risk of cyber fraud, businesses need to understand the direct and indirect impacts of fraud and the financial burdens associated with it. Beyond the obvious and direct financial losses, we worry about, companies need to consider the implications of fraud – and fraud prevention – for their customers, reputation, business operations and future revenue.
The Impact on Customers and Your Reputation
The risk of online fraud – and the prevention measures used to mitigate it – can have a significant impact on the customer experience of your business. Fraud prevention measures can range from pin codes and login systems to bot tests and other verification tools, all of which will impact customers. In addition, these systems are constantly running security checks in the background, which need to be monitored and updated by the business itself.
Fraud prevention measures can be burdensome to legitimate customers despite their necessity. It is critical, in the growing age of online shopping and digital payments, to ensure that your business is equipped with reliable fraud controls that keep your customers and your business safe from online criminals. You never know who is trying to find holes in your online payment systems or merchant software.
No company wants to invest significant time and resources into fraud prevention and no customer wants to wade through countless security checks. It may become frustrating for customers to keep inputting their details or transferring to secure online payment systems, but all of these steps are critical for protecting their personal privacy and financial security, as well as the company’s.
Impact on Business Operations
The operational impact of fraud mitigation and prevention facing businesses can be extensive. The larger your business’s operations and online presence, the larger your investment in fraud detection and online security will have to be. Over the past few decades, anti-fraud technologies and software have evolved to meet the growing cybersecurity risk of the 2020s.
The traditional anti-fraud approach would combine a variety of different, independent fraud prevention tools and systems and attempt to stack their capabilities. This was marginally successful for a time; however, it became clear that integrated, streamlined and intelligent anti-fraud systems were needed to improve digital fraud prevention.
Modern anti-fraud platforms are being rooted in AI and machine learning, automating business operations and analysing every piece of financial data that impacts your company and its customers. Costs are lowering every year, but fraud detection and mitigation can still be a little pricey. However, the investment required to secure reliable and effective anti-fraud solutions will always be incomparable to what you could lose to online fraud.
The Impact on Future Revenue
Fraud is commonly considered in terms of a business’s bottom line. Yes, the immediate impacts of succumbing to banking or online fraud can be devastating, but there are near- and long-term consequences for your business and customers to consider. Your future revenues are at risk when your business operations, finances or customers are at risk.
There is an obvious opportunity cost associated with investing in anti-fraud technology, but there is a much greater cost to pay if your business becomes victim to cyber-criminals and fraudulent schemes. It could, for example, lower a company’s customer experience and consumer demand to limit their return policies, switch to a new payment platform or conduct extra security checks.
Despite these opportunity costs, it is important to remember that the financial impact on your future revenues is much greater when your online data is breached, customer identities are falsified or payments are declined. Not to mention, having a reputation for unsecured online payment options, financial disputes or risks to customer privacy and data will be devastating to your company’s potential growth and future earnings.
Being a victim of online fraud is not just about financial losses. They are a major consequence of having weak fraud prevention tools, but the impact is so much greater. Once a weakness has been found, these cyber-criminals will try to exploit that weakness for all its worth. Successful anti-fraud systems and fraud prevention strategies will require a holistic approach that integrates various tools, software and smart technologies to keep your business’s online presence totally secure.
MarisIT is committed to protecting South Africans and their businesses from the growing threat of online and banking fraud. We offer a range of anti-fraud solutions and services that are designed to mitigate all cybersecurity risks and keep your company safe and secure. For more information, contact MarisIT today!