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Capital One's New Platform Aims to Help Prevent Credit Card Fraud and Improve the Customer Purchase Experience

Capital One's Enhanced Decisioning Data platform bridges the data gap with merchants, improving mutual customer experiences by approving more legitimate transactions while also boosting fraud prevention.

Whether a business is brick and mortar, online, or a combination, credit card fraud is a significant concern. When merchants are victims of fraud, it can cause financial and technical headaches as well as negative customer experiences.

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No business is completely safe from fraud. Fraudsters are innovative and find creative ways to monetize almost anything. Merchants want to utilize powerful data to prevent fraud, while minimizing declines and maintaining a smooth customer experience.

LexisNexis' The True Cost of Fraud study estimates every $1 of fraud cost U.S. retail and ecommerce merchants $3.60 in 2021, compared to $3.13 before the pandemic. In addition to the responsibility businesses have to quickly process customer transactions, merchants are keenly focused on preventing fraud to avoid the downstream costs associated with operational expenses, network processing fees, etc.

For most ecommerce transactions, because merchants have insights and access to valuable risk data, the payment network rules make merchants liable for fraud. Compromised credit card data or compromised merchant profile or account information can lead to fraud.

"Capital One's Enhanced Decisioning Data (EDD) platform helps mitigate a merchant's risk for fraud while protecting customers," says Chris Sparks, Head of Fraud Strategy at Capital One. "This is achieved with an innovative, API-connected, platform we designed to receive additional risk data for use in authorizing customer transactions and detecting fraud simultaneously."

Beyond preventing fraud for customers, Capital One strives to make it easy for merchants to leverage their existing third-party connections by partnering with a number of risk service providers, acquirers, processors, and payment facilitators.

"Historically, the payments ecosystem has been a 'zero-sum game' between merchants and card issuers," Sparks continues. "One of our goals, beyond our primary goal of preventing additional fraud while approving more transactions for our customers, is to help improve the overall effectiveness of payments. We can create mutually beneficial experiences across the ecosystem."

Fraud chargebacks are another common pain point for customers, merchants, and financial institutions. Chargebacks can occur when a customer claims to have unauthorized activity on their account, and they can be an expensive burden for merchants, as typically they must reimburse bank customers for fraudulent transactions.

A portion of customer fraud chargebacks result from simple customer confusion, maybe due to cards saved on a merchant profile, used by family members and unrecognized by the actual cardholder. With the data provided to their Enhanced Decisioning Data platform, Capital One can explain these charges early in the process, help avoid customer confusion, resolve their concerns, and avoid costly operational processes for Capital One and its EDD partners.

PayPal, a major player in online payments, as both a Digital Wallet and a Payment Service Provider, is one notable merchant platform partnering with Capital One in data sharing. PayPal processes an incredible volume of transactions every year, however, a number of legitimate PayPal transactions can be declined by banks due to fraud concerns. Collaboration with Capital One helps significantly reduce such declines by combining EDD partner insights about mutual customers' transactions with Capital One customer data.

Merchants and payment facilitators, like PayPal, have incredibly valuable risk data, but no way to share their insights with card issuers. Combining their valuable risk data with Capital One's data about consumer spend patterns and history creates an optimal balance of positive customer transaction experience and fraud prevention.

"This service allows Capital One to gather crucial information and put the pieces together, which means they make much better decisions and merchants have better approval results," says Jim Magats, SVP, Payments Partnerships and Solutions at PayPal.

With this secure, legal, and purposeful sharing of specific data about the transaction, PayPal makes tens of millions of shopping experiences end with successful approvals, rather than declines. At the same time, this also helps protect customers, merchants, and card issuers from fraud.

"We've seen some pretty incredible positives from our data sharing partnership with Capital One," Magats continues. "Any time we can improve the shopping experiences of our consumers in a way that scales across tens of millions of merchants, we call it a win."

The Capital One Enhanced Decisioning Data platform is dedicated to providing reliable data and integration support for digital products. Getting started is simple. Merchants can learn more by signing up for free on Capital One's Developer Exchange website. There you'll find program specifications and can request additional information through their Partner Success team.

Capital One

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