Lucy Hinton, SVP Client Success EMEA at Flashtaking by Mediaocean
Globally, inflation has been on the rise. Recent, geopolitical events are causing the cost of living to skyrocket, with food and energy prices hitting record highs. Understandably, consumers (and subsequently businesses) are becoming more cautious with their spending and some experts are even predicting the start of another recession. With this potential new reality at our doorstep, the effective and wise marketer will be taking proactive steps now and considering new strategies to minimise exposure to risk. The truth is, no two recessions are the same, so let’s consider the best strategy to adopt today…
2022: a year like no other
Each downturn is unique in the events leading up to it. A recession in 2022 would be no different, namely with regard to the current state of the UK labour market.
In most recessions, economic output and employment decline simultaneously. Losses in revenue often force businesses to cut down on staff and higher levels of unemployment lead to reduced consumer spending. As an example, in the 2007-2009 downturn – colloquially known as ‘The Great Recession’ – the Conference Board’s U.S. Consumer Confidence Index sank in 2009 to the lowest level since tracking started in 1967. Unsurprisingly, this created challenges for marketers, both through the downturn and in the ‘recovery period’.
In 2022, in contrast with other years, the UK labour market (by many accounts) is thriving. Though employment is still below pre-pandemic levels, there are currently a record number of job vacancies on offer.
This is important to consider in the context of “recession psychology”. Ultimately, purchasing power depends on several factors – including consumers’ having disposable income, consumer confidence and the idea that people subscribe to a consumption lifestyle. This more buoyant job market gives consumers access, theoretically, to more income and subsequently puts marketers in a different position to 2007-2009.
Thankfully, it’s not all doom and gloom. Despite the unique iterations of each one, certain patterns in consumer behaviour have emerged from previous downturns. Marketers can learn from these trends and adapt strategies accordingly.
The audience may change and so might priorities
Both consumer and B2B customers fall into several categories. It’s therefore important for marketers to revaluate and understand where their audience sits in a downturn. During and post-recession, it’s key to appreciate that your demographic, and the customers which fall into each category, may shift as the change in state of play impacts organisations.
Whichever customer group they fall into, all purchasing decisions will fit into one of four categories – based on the type of product or service being provided:
- Essentials are necessary for survival or perceived as central to well-being.
- Treats are indulgences whose immediate purchase is considered justifiable.
- Postponables are needed or desired items whose purchase can be reasonably put off.
- Expendables are perceived as unnecessary or unjustifiable.
The essential products and services are the easiest to predict, as they will differ the least. However, what falls into the remaining three categories may vary hugely between customers. Throughout a downturn, it’s understandable that consumption priorities may shift. For example, what previously fell into essentials may be moved into postponables or expendables. Whereas other items may be eliminated completely.
What does this mean for marketers? Whatever the downturn looks like, it’s clear that the business landscape will change dramatically. As a result, marketers need to be innovative, proactive, and agile to stay ahead of any challenges- starting with two key factors…
C-Suite superheroes can save the day
Over the past two years, the C-Suite have gone above and beyond to keep things moving within their organisations. CMOs and CFOs in particular, have faced the most abrupt areas of change. For marketers, adapting to the needs of consumers who had their lives turned upside down has required real, rapid innovation. On the finance front, the shifting economic sands have needed faster analysis of better data than ever to manage.
It is this power pairing, of the CMO and CFO, that companies need to encourage and embrace. A strategically aligned C-suite can help drive digital transformation and expand growth opportunity. In fact, leaders of digitally advanced companies credit their greater gains to higher levels of synergy between finance and marketing teams.
A strong relationship between marketing and finance ensures company leadership is on the same page about important business objectives like demand forecasting, lead generation, and investment allocation—all of which accelerate digital transformation strategies.
Organisations which already have a deep collaboration between CMO and CFO are on the front foot. For companies which haven’t yet built those lines of collaboration, now is the perfect time.
Smart investments in technology
The second conversation that marketers need to be having is around tech investments. Growing data availability has made it possible to target consumers more precisely and reactively. Insights gained from looking at the data can help marketers to figure out what’s working well and what’s not in their media spend.
For example, forecasts from media agency Zenith, expect global advertising spend on social media to rise to $177bn in 2022 – putting it, for the first time, ahead of TV spend, which will sit at $174bn. Though social media’s influence can’t be denied, there’s a risk to seeing it as a singly, monolithic channel among media. In fact, no channel happens in a vacuum. It only takes looking at our own experiences as consumers to realise media is media, and we want the flexibility and choice to watch what we want when, where, and how.
This means that data and analysis is key to understanding the effectiveness of media spend, content and tools. In turn, this creates two clear benefits for marketers. The first, marketers can see what needs to change and where the focus should be rather than having to reduce budget. Secondly, and most critically, this sort of analysis provides the opportunity to create a flexible omnichannel strategy and approach where marketers can influence across a variety of channels and devices while still allocating more resources to channels proving most influential at the same time as not over allocating to what’s trending at the expense of proven media formats and creative.
We can’t control the state of the economy or stop the UK from heading towards a recession. But if marketers remain proactive and agile in their mindset and approach, they can move forward into this (potentially) uncertain period, knowing they’re armed with the necessary tools and practices to succeed and future-proof their plans.
Defining Fraud in 2023
Scott Buchanan, Chief Marketing Officer at Forter
Fraudsters are fluid — they constantly experiment with new tactics to find cracks in a merchant’s defenses. In 2023, there are five trends that merchants need to be aware of — we saw each in 2022 and expect to see them with even more frequency in the year ahead.
Human ‘Bot’ Farms
First, let us acknowledge that while “human bots” is an oxymoron, it is also highly insensitive. At present, our industry lacks a better way of describing the practice. It used to be that human ‘bot’ farms referred to sweatshop-style arrangements in which poorly paid workers, often in developing countries, spent their days on brute force attacks, solving things like CAPTCHAs.
Now, though, a new twist on this old theme has arisen. In short, human bot farms use trafficked humans to scale their fraud operations. Often, they behave as bots, conducting brute force (and similar) attacks.
Human bots were widely recognised in fraud manager communities as a driving force behind recent repeated attacks, especially during the holiday rush. For example, human bot farms bombarded merchants that offer limited edition merchandise, decreasing the chances that prized products find their way to (and ultimately frustrating) good customers. These same operations also applied several tactics that follow at a scale that overwhelmed some fraud solution providers and their merchant customers.
Low-tech Address Manipulation
In the past year, fraudsters reverted to old tricks to circumnavigate rule-based fraud prevention as we saw an uptick in low-tech address manipulation. Consider a merchant with a rules set that checks a shipping or billing address against a negative list. And let’s say a noted fraudster has an address of 123 Main Street that is on that list. Therefore, any transaction with a shipping or billing address of 123 Main Street will be blocked by rules.
Fraudsters found an easy workaround. They simply write a variation of the address during checkout that evades the rules but can be easily understood by FedEx, UPS, or any other delivery company. For example, 123 Main Street becomes One-two-three Main Street or 123 Maain Street.
This should be simple to identify and block in theory. Still, fraud managers were frustrated that rules-based solutions — even those that applied artificial intelligence to speed rules application — struggled to spot this manipulation. During the Black Friday rush, more than one vendor threw up their hands and admitted they had no way to stop this tactic effectively. And as a result, fraud teams with these solutions had to manually review a growing queue of transactions.
With the growing presence of marketplaces to exchange goods, fraudsters are using triangulation more. Think about this as ‘stolen to order’ (instead of made to order). A fraudster posts a sought-after item for sale on a marketplace; in 2022, some of the most popular items for triangulation were high-end ‘cozy’ blankets, sneakers, gaming systems, and other electronics.
When a consumer buys an item from a fraudster on the marketplace, the fraudster then steals the item from a merchant. They input a shipping address for the marketplace buyer at checkout, which typically evades address verification checks. The marketplace buyer gets their item; the fraudster gets their money; the merchant gets penalised, and the marketplace is entirely unaware.
Fraudsters prefer triangulation because they don’t make any effort until they have a buyer — they never have to worry about stealing something they can’t sell, and they never have to touch the merchandise (further reducing their operating costs).
Emboldened cheaters are attempting more brazen tactics. A prime example of that is double-dipping — while this is not new, we did see more attempts (especially from amateurs and previously good consumers) to double-dip in 2022.
Double dipping can take any form where a bad actor wins twice. For example, the bad actor makes a purchase and has the product shipped. They tell the merchant the item was not received and simultaneously file a chargeback with their issuer. Since it may take hours or days for the issuer to inform the merchant of the refund request, the communication gap can mean the bad actor receives money back from both entities and keeps the product.
We’ve also heard examples of bad actors buying and receiving an item, then filing a return, yet failing to return the item. Instead, they send the merchant back a package with rocks (or something else weighted). In one particularly devious example, a bad actor filled a bag with dry ice, which evaded a weight check by the delivery company, and then arrived at the merchant as an empty package.
The best-known form of friendly fraud is chargeback fraud when a customer makes a purchase and receives it but files a fraud chargeback claiming that the purchase was made by a fraudster. This form of friendly fraud has been growing dramatically in recent years. Less recognised is that other forms of friendly fraud — which can also be labeled policy abuse — are increasingly serious.
For example, a consumer buys a sweater as a final sale. When it arrives at their doorstep, they realise it doesn’t fit as they’d hoped. Disappointed, the (previously good) consumer contacts the merchant to claim the sweater never arrived (code = Item Not Received) and demands a refund. The consumer now has the item they can wear (hey, at least the fit is close) or resell on a marketplace for profit.
Friendly fraud can also surface as returns abuse (returning items worn or outside of store policies), promotions abuse (re-using new customer discounts or other voucher codes), and more.
Friendly fraud is difficult to stop since it is often perpetrated by good consumers — they don’t appear on negative lists or fail basic rules. But professional fraudsters get in on the same acts, industrialising the consumer problem by increasing its scale and professionalism significantly. To increase their odds of success, they have gotten pretty systematic about this form of fraud. For example, on the dark web, fraudsters have shared the exact language to use when calling specific large merchants or issuers to nearly guarantee a refund or chargeback.
Parting Thought: The Power of Identity
The above tactics that fraudsters used with some success in the past year generally exploit gaps in rules-based systems (deployed by the merchant and/or offered by a fraud solution provider). These tactics don’t work when you can pinpoint the identity behind an interaction.
When you can be statistically confident that the identity entering an address of “One-two-three main street” is associated with fraud, it doesn’t matter what they enter in the address field; their transaction attempt is blocked. When a known fraudster is attempting to put an item up for sale on a marketplace or purchase an item with a net new shipping address, you stop them. And when they try to re-use promotional codes repeatedly, you reject the attempt.
You cannot pinpoint an identity with rules — instead, you need a massive graph of online identities and as much data as possible on each. While fraudsters always manipulate aspects of their identities, they cannot mask thousands of data points. Next-generation fraud solutions that use machine learning to augment human expertise can pattern match and pinpoint identity.
And to build the largest identity graph, you need a consortium of the largest merchants — collectively, they will ‘know’ the vast majority of online identities. And in this model, an identity — a bad actor or a good customer — known to one merchant is immediately known to all merchants.
And that is why the final trend for 2023 will be merchants abandoning rules-based systems at an increasing rate. That includes the rules-based fraud solution providers masquerading as machine learning (but really just speed up the application of rules). To combat more sophisticated fraudsters, merchants will make decisions based on identity. They will seek out the largest identity graph in order to achieve superior results.
Mizuho Bank Luxemburg upgrades anti-financial crime compliance risk management with Napier
Mizuho Trust and Banking (Luxembourg) S.A , the Luxembourg subsidiary of Japan’s Mizuho Trust & Banking division (part of Mizuho Financial Group) , is upgrading its Transaction Monitoring framework strategy through a partnership with Napier, the financial crime compliance technology specialist.
An intelligent compliance platform, Napier Continuum, including Transaction Monitoring, Client Screening, Perpetual Client Risk Assessment and Client Activity Review, will provide Mizuho Bank Luxemburg with a holistic overview of compliance that will enable it to connect data, control compliance operations, and manage risk.
The bank wanted to upgrade its framework to make it more robust given the importance of financial crime for credit institutions.
Naim Tliba, Chief Compliance Offer and Vice President at Mizuho Trust and Banking (Luxembourg) S.A., said: “We chose to work with Napier as it has the flexibility to meet our needs, at the same time offering the most advanced technology supported with powerful AI. With improved transaction and client monitoring capabilities, our organisation will be able to stay ahead of the curve and provide our clients with the most secure and regulated asset servicing experience.”
As part of Mizuho Financial Group, Mizuho Trust & Banking (Luxembourg) S.A. has been formed in 2000 and provides securities and fund services to its institutional clients.
Napier’s compliance technology helps businesses and financial institutions to comply with local and international anti-money laundering (AML) regulations, monitor transactions, and screen customer and business partners and therefore participate to the efforts to better combat financial crime.
Greg Watson, CEO at Napier, said: “Our range of new-breed compliance solutions help organisations like Mizuho Luxembourg to gain control over their risk management so that it can become a competitive advantage. The technology is one side of this, but it’s the capability to adapt a system in adherence with local regulations that offers the most effective solution, and that’s what we have been able to provide Mizuho Luxembourg. Approaching a system upgrade in this proactive way means that they will be equipped with a futureproofed anti-money laundering strategy that will take care of their AML compliance needs.”
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