Microsoft’s recent launch of its new eCommerce fraud prevention solution, Microsoft Dynamics 365 Fraud Protection, is further proof that eCommerce prevention is increasingly an interesting line of business for the world’s largest cloud computing companies. It’s easy to see why. Incumbents have been using cloud technologies to build models across their customer base for years.
But Microsoft’s announcement signals that while in the past the market created by those incumbents remained dominated by them, the future will be much different.
It’s true that solutions like Amazon Fraud Detector, and now Microsoft Dynamics 365 Fraud Protection, come from companies that have never specialized in fraud prevention before. That appears poised to change. It’s increasingly clear their long-term strategy is to take the cloud data already generated by their large user base of retail and commercial clients, as well as their expertise in AI/ML cloud applications, and build more effective fraud prevention models. They will also bundle their services together with their other products, finding an additional competitive advantage by offering a seamless customer experience.
This offers exciting new possibilities for consumers and businesses. It will also put pressure on the traditional solutions’ business model. Although they have the advantage of a decade’s head-start, they will be forced to innovate. We’ve identified three main areas for them to focus on.
First, the sheer volume of data available to companies as large as Amazon and Microsoft give them access to more data than any standalone fraud-prevention solution provider has. To counter-balance that, incumbents will need to work hard to use their fraud prevention expertise to their advantage. Fraud prevention is complex, and as talented as the teams at companies like Amazon and Microsoft are, they will learn that throwing data at the problem will not be enough. Incumbents’ experience and focus are a large competitive advantage.
Second, incumbents will need to seek out new revenue opportunities and even new lines of business. Ecommerce fraud prevention used to be synonymous with chargebacks. Today, it has grown to encompass a wide-range of fraudulent and criminal activities including content fraud, account takeovers, and even cryptocurrency. The pivot away from traditional card not present fraud prevention towards a more holistic approach has already begun, and will only continue to accelerate in the future.
Third, we anticipate the industry is due for a round of consolidation though mergers and acquisitions such as Sift’s recent purchase of Chargeback. The somewhat immature industry of a decade ago could support a large constellation of specialized solutions all along the fraud prevention value chain. Today, that is increasingly untenable. The slice of the market that will not use either Amazon or Microsoft cloud technologies will be extremely thin; incumbents will need to combine into end-to-end solutions to provide alternatives attractive enough to overcome the ease of adding fraud prevention services onto a pre-existing AWS or Azure invoice.
We’ve already seen a few acquisitions in the last twelve months; that trend will only accelerate in the coming years.
As fraudster sophistication grows, the need for more sophisticated solutions grows as well. Microsoft is a welcome addition to the community. We look forward to seeing how they contribute in the coming years, and how they will push our community to improve. A rising tide lifts all boats.
~The Editorial Board
Source: https://dynamics.microsoft.com/en-us/ai/fraud-protection/