Fraud Prevention Archives – Page 24 of 64 – Forter

The price of gas is one of the significant indicators that consumers use to judge how they feel about the economy and how far their dollars are stretching. When it goes up, it makes national headlines — certainly not typical for other industries and products. Yet, while customers tend to blame gas stations for prices, the reality is that stations usually make only about 2 cents per gallon in profit.

Today’s gas stations and convenience stores know they need to focus on making profits from supporting aspects of the business, such as convenience stores and related services. They also know that shifting towards a consumer-centric approach is vital to future survival and success.

Fraud analysts can profoundly influence how well a business succeeds in this crucial challenge. Don’t believe me? Let’s dive in.

Oil & Gas: Margins Matter

Fuel used to be a source of profit for oil and gas stations, but that reality was a while ago. Today’s reality looks like this:

• Average net margin across all industries: 7.7%
• Average net margin in grocery stores (well known to be a slim margin industry): 2.5%
• Average net margin for fuel for a gas station: 1.4%

Today, a typical station might only make ~$200-$300 daily from the gas they sell. And they can’t raise prices for gas unless they absolutely have to because folks will stop coming to them. As we said at the start, consumers are highly sensitive to the price of gas.

About two-thirds of a gas station’s profit comes from in-store sales. Roughly 44% of visitors go inside the store, where gross margins on certain items can be upwards of 50%, and a relatively large percentage of customers are willing to purchase more expensive items; 21% buy cigarettes, and 11% buy alcohol, for example.

That means doubling down on measures to bring customers into the store and encouraging them to spend while they’re there is critical to profitability. As electric vehicles become more common and customers have more time to spend at the station while their car charges, finding ways to encourage them to spend while there and incentivize return visits is also a huge potential opportunity.

Fraud & Abuse Cut Into Margins

When you have to keep a close eye on your margins, you’re very aware of anything that might reduce the profits you manage to make. Fraud and abuse are important factors here.

It’s particularly important to mention this, because, historically, gas stations haven’t had to worry much about fraud or abuse. Transactions were largely card present, meaning the liability was on the bank rather than the business, and loyalty programs were popular but took time to set up, limiting the number of customers likely to cheat. Now, everything has changed.

• Apps mean that payments are often card not present, putting liability on the retailer
• Apps mean accounts are easy to set up for abusers looking to get lots of discounts and deals to which they’re not entitled
• Legitimate accounts can be taken over and misused by fraudsters
• Accounts can be set up by fraudsters and loaded with stolen payment methods
• Fraudsters are likely to target items like cigarettes, small electronics, and alcohol, all of which are relatively valuable and easy to resell

All of these activities and more mean the business stands to lose out. In the long term, companies that react to risk by shutting down options, restricting loyalty programs, or adding friction may turn customers off, which is a serious problem when considering the business’s long-term health.

Moving the Margin Needle

I know I’m biased because I’m a fraud analyst and love my job. Still, fraud-fighting experts have tremendous potential to help set these businesses up for success and overcome the challenges described in this article.

It’s not that I’m a hammer, so I think this problem is a nail. This problem results from the shift in how gas stations relate to their customers. But the mindset of fraud prevention is needed to protect customers, stop fraud, and optimize revenue — because that’s what we do.

I see this playing out in 3 main ways:

• Reduce risk: This is the most obvious because risk management professionals are skilled at this. It’s important to note that it needs to operate when it comes to abuse as well as fraud; fraud prevention should be used to help businesses become confident about the real identity of the customer in front of them and whether they’re well-intentioned or not.
• Empower businesses to offer more options to customers: Some companies react to risk by reducing their options, but the opposite is possible by leveraging the expertise of fraud-fighting. If you can be confident about which customers are legitimate, you can be more tailored and more flexible about your offers and options. Like with loyalty programs, for example.
• Improve customer experience: Customers like to be able to pull out their phones and make payments, collect discounts, and more without having to sign in, validate their identity, or otherwise encounter friction. If you know who’s who, you can enable that. If you have access to a network that draws on knowledge of customers from other stores, you can even have the same smooth experience at sign-up.

All of this comes down to a focus on identity. If you can be confident in the individual’s identity and history — whether that’s good or bad — you know exactly how to treat them.

Ultimately, identity intelligence is what fraud prevention is all about. The mindset of a fraud analyst and the benefit of the tools that they use every day can have a tremendous impact on the margins of an oil and gas station because they solve precisely the problem that this industry is facing today: How to shift towards a consumer-centric approach in a way that’s safe, streamlined and successful.

Doriel Abrahams is the Principal Technologist at Forter, where he monitors emerging trends in the fight against fraudsters, including new fraud rings, attacker MOs, rising technologies, etc. His mission is to provide digital commerce leaders with the latest risk intel so they can adapt and get ahead of what’s to come.