It might be as easy as stating that we can never be completely safe when using the internet. And when you see that there were 2.6 million fraud cases reported in 2023 – resulting in consumers losing over $10 billion, the fact becomes all the more obvious.
But for a business to understand why fraud detection is so important, they must understand the consequences of fraud. How their operations could suffer. How it can be a point of no return.
So, this will be the topic we’ll focus today.
How detrimental fraud can be for SaaS platforms
SaaS platforms are awesome. They’re cost-efficient, more flexible, and allow businesses to access their applications from everywhere in the world. Just by being connected to the internet.
But this is also the reason why they’re more vulnerable. Mainly to fraud. As a SaaS platform, you handle a lot of sensitive information from your customers – be it personal data, payment details, or business intelligence, making you the ideal target for fraudsters. How so?
- Centralized data: You know how in a hotel room with no safe box, you’d scatter your money across different places? However, this isn’t how the SaaS space works. All data is centralized, which, yes, can help businesses save some cash. But it also means that if a breach happens, fraudsters would get their hands on a lot of data at once.
- Integration with third-party services: You must be extremely careful of the third-party service you’re integrating with. It might just be the weak link fraudsters were looking for. Simply put, if a third-party service you’re integrating with is compromised, fraudsters might also gain access to your system, and the rest is history.
In the SaaS space, everyone is dependent on one another. This means that a risk for one is a risk for all. By choosing not to protect your SaaS platform, you’re choosing not to protect your customers. By choosing to protect your platform, you’re choosing to protect your customers.
How fraud detection can help
A fraud detection software can detect fraud before it spirals out of control and leads to serious consequences. Simple as that. But, many factors play a role in how a solution such as SEON’s device intelligence solution can detect fraud effectively. These factors include:
- Analyzing user behavior: Fraud detection solutions get to know their users. They know the location they usually log in from, the time they usually log in, how much they normally spend, etc. If anything were to change in this so-called user behavior, they would immediately become suspicious of a potential fraud attempt.
- Risk scoring: These changes don’t always indicate fraud. For example, anyone can log in from a new device, like when they buy a new smartphone. This is why fraud detection solutions evaluate how big of a risk the change actually is and take the appropriate measures, such as notifying you or blocking the transaction immediately.
- Monitoring transactions in real-time: Fraud detection solutions do all of this monitoring and analyzing we’re talking about in real-time. They leave no room for damage to be done. They act as soon as a suspicious transaction or login takes place.
Fraudsters can try all they want, but with fraud detection, chances are their attempts won’t be as successful as these solutions cut them off at the source. They’re acting as soon as a transaction takes place. That said, let’s talk about the benefits fraud detection solutions offer SaaS platforms.
Putting an end to financial losses
One of the biggest risks of fraud is financial. It doesn’t always mean that you’ll lose all your money at once. This can be happening bit by bit. Chargebacks, for example, in the event of a stolen credit card, are a good thing for customers. However, they can slowly eat away at your profits. You won’t only lose the profit but will also have to deal with other fees.
On average, chargebacks occur in 6 out of every 1000 transactions, while payment processors allow a maximum chargeback ratio of 1%. This means that you have to keep your chargebacks low if you want to avoid penalties and stay in good standing with payment processors.
There’s also subscription fraud. Some users can create multiple fake accounts by using stolen identities or payment details and use them to take advantage of free trials or discounts.
Fraud also impacts your finances indirectly. What does this mean? Well, in the event of fraud, especially if more serious damage has been done, you might have to put the regular work operations on hold. Your employees might have to work extra hours to review accounts, handle disputes, and improve your security measures. This delay can really hurt your finances.
But your SaaS platform doesn’t have to face these issues. By implementing a fraud detection solution, you can find out in real-time if multiple accounts have been created with similar payment details or from the same IP address. You will not lose money ever again.
Protecting customer trust and business reputation
Losing money isn’t ideal. But there’s nothing worse than customers losing the trust they have in you. Why? Because it’s a lot easier to regain an income than to get a customer to trust you again after a fraud incident. There’s nothing much you can do after your reputation has been tarnished. There will be negative comments and “stay-aways” all over the internet.
One thing you must understand about customers in 2024 is that they’re:
- More informed and discerning than ever;
- More careful regarding who they share their information with;
- Appreciate when businesses are transparent about the security measures they implement and any incidents that arise;
- Are quick to lose trust.
So, try removing their doubts first if you want to attract and maintain clients. You can do so by implementing a fraud detection solution. By doing so, you’re showing them that security is your priority. And even if a fraud attempt were to happen, you’ll act quickly and won’t let anything happen. In other words, you’re showing them that you’re worthy of their trust.
Complying with regulations
Regulations regarding fraud detection have gotten to be a lot stricter. As a SaaS platform, you’ll often be scrutinized for how you handle sensitive information. And this is a good thing. It encourages you to safeguard the information of both you and your clients and to take fraud more seriously.
Such regulations include the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States. Both of these require businesses to be transparent about the personal data they collect and the security measures they implement. Fraud detection solutions are designed to do everything these regulations require:
- They will help you protect sensitive information by verifying the identity of your users, making sure they’re who they say they are, and are honest about their age.
- They also come with data encryption features. So, you can rest assured that all data that your customers store and transmit through your platform is secure. Even if fraudsters get ahold of it, they won’t be able to read it. So, it’s basically a dead end.
- Advanced fraud detection solutions can even adapt to the newest tactics of fraudsters, as well as to the newest changes in regulations, helping you stay compliant.
By choosing to stay compliant, you’re not just choosing to avoid fees and penalties. You’re actually making a difference. A distinction in the way you interact with your clients and the level of fraud protection you have. You’re choosing to stay safe in times when no one is really safe.
Choosing to stay safe and secure
It’s safe to assume that fraud detection is more than just spotting fraud. We’re all capable of deciding whether a transaction is suspicious, but this is simply not enough in today’s world. Fraudsters don’t wait for you. They do what they want whenever they want, that is, whenever they have the chance.
Fraud detection solutions do what we humans can’t. They’re monitoring transactions 24/7 and alert you of potential fraud as soon as it happens. They encrypt data so that fraudsters can’t read it. They are aware of each user’s typical interactions with your platform from the beginning.
As a SaaS platform, you’ll always be vulnerable to fraud. This will never change. You can only alter your beliefs and approach to these risks. So, choose to stay safe!
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