Payments, Fraud, and Leadership

A few days ago, I found myself wandering through YouTube and came across an old advertisement for a well-known national airline. By my guess, it ran a generation ago, based on the look and feel of the grainy ad.

In it, the Vice President of Sales calls his team together in the office to announce that they had just been fired by their oldest client, someone who they’ve done business with for over 20 years. The boss looks crestfallen as he explained the current nature of business, full of phone calls or faxes (this was an old ad) and bemoans the lack of a personal connection with their clients.

He said that the fired us because they didn’t know us anymore.

The next scene shows the Executive Assistant as she hands out airline tickets to the entire sales team so that they could personally visit and reconnect with their clients. The VP picked up his ticket and he said he was off to visit the company that just fired him. The voiceover by an Academy Award actor restates the airline’s value story before the music rises and the commercial fades to black.

If you can look beyond the dated quality of the ad, some truths begin to emerge. Yes, the people around the table were predominately white and male. Yes, you had to look hard to find any shred of diversity. However, if you look past all of these things, you might get a glimpse of where business travel might be heading once we get through the pandemic.

Right now, business travel is comatose and even deadly for some. It is suspected that the 8 million people who traveled over the recent Thanksgiving holiday have turned themselves into super spreaders as we move into a very deadly third wave.

So, what happens next?

If you are at a socially-distanced Thanksgiving event and you run into a family member involved in eCommerce fraud prevention, be gentle; they are more than a little freaked out at the moment.

We are now heading into the most surreal of holiday shopping seasons.  With COVID-19 rebounding into a deadly third wave and as retail shopping is regulated to maintain social distancing, more people would rather sit in front of their laptops than fight the holiday crowds.

Even though several vaccines are ready to be introduced to wider audiences, we will not see its impact until the end of Q1 2021. With that in mind, I think that the expected rise in online shopping will exceed the projected 20% increase experienced in 2019.

When holiday spend figures were calculated prior to the opening bell, COVID infection rates were on the downslope. Also, certain states were aggressive when it came to re-opening their states to achieve some sort of normalcy.  However, as the viral infection rate roared back with a vengeance, more online spending will equate into more online fraud.  

This means that larger merchants—often the targets for Bad Guys—will find themselves under a greater threat as we move through the holiday season.  We already know that online fraud has spiked as the result of the pandemic, nearly doubling from 2019.  We know that the sophistication level demonstrated by Bad Guys has expanded in depth and breadth. We also know that Bad Guys will always have the element of surprise even as billions are spent to fight fraud and predict where weaknesses in the payment ecosystem might occur.

So how will Bad Guys take advantage of things?

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There have been a number of times where I have been pulled aside at a party or a cookout and somebody has asked me about credit card processing because they know I have worked for American Express and Worldpay, among other organizations.  

They’ll ask, “Do I have a good rate?” Whenever that happens, I’ll reply, “There is rate and then there is total cost.  Which would you like to talk about?” After I see the quizzical look on the faces, it gives me a chance to give a quick tutorial on how credit card acquirers structure their fees.

I will often tell them that “rate” represents 40-50% of their overall program cost and they should focus their attention on the big number. To determine their program costs, simply divide fees into their volume—because that is the number that matters.

Looking through a credit card merchant statement is like reading a mystery novel because the really interesting stuff is found on the last page. When they tell me about the great rate they got from their provider, I’ll ask them to email me a copy of their latest statement and we can discover what is real and what is fluff.

What does that look like?

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I have a good friend who is now in transition as a result of a layoff. She is a very smart and shrewd business development professional who has been in Payments a little shorter than me.  She has a wealth of contacts and has done quite well in the Middle Market/National and Enterprise space. She is quite proud of her collection of Lucite, plaques, and other business trophies over the past two decades.

She found herself in transition at the start of the COVID pandemic outbreak and is going through the process of interviewing.  When I spoke to her, she told me that she was stunned to hear that certain people felt that she was not “entrepreneurial enough” since she had spent the bulk of her career working for some of the larger brands within the payments space.

She was shocked to hear that—in their minds—she somehow lacked “startup experience.” I was equally surprised to hear this feedback because she was quite familiar with sustained success.

When hiring managers paint with that kind of broad brush, it demonstrates an organizational short-sightedness which needs to be addressed.

Why does this drive me batty?

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Fraud and fraud prevention represent a never-ending battle between Bad Guys and Good Guys.  The basic rule is that Bad Guys will A) steal anything of value and B) and anything that’s not nailed down.

People need to understand that somewhere in a bleak Stalin-era warehouse located in Belarus, people are using their laptops to rob you blind.  

It’s hard to believe that the first major retail breach took place at Target in 2013 and resulted in a complete turnover of their c-suite. Today, we find out about breaches that happened months earlier, we barely raise an eyebrow. Customers are getting lazy when it comes to this kind of fraud and there is a price to be paid.  Maybe we will change our passwords, but then again, maybe not.

Since the mid 1990’s as a nascent eCommerce market grew, insidious groups of Bad Guys followed close behind. As the payment ecosystem became more complex and more sophisticated, Good Guys did their best to pace themselves with the imaginative genius that Bad Guys often deployed.

Countless billions have been spent to make transactions safe. There are a variety of authentication protocols on the front end of the transaction, rules that have been created in tandem with the provider, and consortium databases designed to mitigate the spread of fraudulent spenders.

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Here is an illustrative story that still breaks my heart, but what emerges is a great lesson.

Several years ago, I was part of a bid process for a large petroleum/retail/lodging deal.  Had it been successful, I would have easily overachieved my annual numbers by June. Then, I would have spent the rest of the year clinching a President’s Club Award and would have been well-positioned to ink the majority of next year’s deals by the end of Q1.

The company in question was clearly ready for a change.   Their platform was getting “long in the tooth,” their reporting was jumbled, and the pricing was above market. Their line staff and senior management understood our value story.

I try not to get ahead of myself in these situations, but in a quiet moment, I could see the outlines of a wonderful European vacation begin to emerge in the back of my mind. We went back for our “Best and Final,” and felt reasonably confident about the outcome.  

Then we waited.

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As somebody who has been in Payments long before “Payments were cool,” I’ve spent the past 20+ years in a number of successful roles in Payments, Fraud Prevention, and Leadership. 

Perhaps it would be a good title for a blog; I think it is.

I have seen a number of trends come and go, some which were embraced, others that were rejected, and still others which were intriguing, but for reasons that escaped us all, never quite caught on.  

In the world of “Civilians,” the world of Payments and Fraud Prevention can easily become a scary thicket of competing brands, different platforms, and an environment where so many data points can lead to confusion instead of clarity.

Perhaps I can offer some.

Yet through it all, Payments is the one strand of ecommerce DNA that connects the buyer to the seller and then back to the buyer again, when goods are delivered, either in person or digitally. Information gleaned from the transaction is worth Gold. Identifying the optimal customer and predicting how they will maximize their spend is The Holy Grail.

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