The Logic Group Blog

The new Annual Fraud Indicator from the National Fraud Authority (NFA) was published this morning and makes some interesting reading.

The headline figure which everyone will pick up on is that the loss to the UK economy to fraud each year is estimated to be £73Bn. Considering the previous estimate in 2011 was £38Bn has fraud really increased two fold? The answer, unsurprisingly, is that it hasn’t; what has changed is the inclusion of new areas of the economy not previously considered in the scope and a step change in the methodology in place.

So what are the interesting facts in the report?

The devil is in the details - an old adage I know, but just the other day I was struck by how accurate that phrase can be. In an online daily news service for Payments professionals there were 2 very different headlines on consecutive days. On day 1 the headline read “UK: Fraud reaches record levels in 2011”, followed the next day by “UK: Fraud losses on debit and credit cards reach the lowest level in 10 years”

How should a Retailer or other merchant respond to headlines like that? Should they increase investment in anti-fraud measures or re-allocate some of that spend to driving new marketing programmes as the risk of fraud is reduced? A more detailed investigation is required – I took a close look at each report, rather than relying on the headlines.
My first observation is that the reports were from two different sources and were talking about different sets of statistics. The “fraud is getting worse” one was from CIFAS, the UK’s Fraud Prevention Service, covering all fraud reported to the National Fraud Database, and the “fraud is reducing” one was from The UK Cards Association covering debit and credit card fraud only. So is that the reason? Well, no it isn’t.  The CIFAS report states that plastic card fraud has increased by 6.3% from 2010 to 2011 whereas the UK Cards Association says the overall rate has decreased by 7%.

Irrational Fears
Have you ever had an irrational fear?  I've had quite a few in my time, but today I'll confess to one involving car windows.  When I had older cars with manually operated windows I had a phobia of cars with electric windows.  My fear was that if I drove one of these new-fangled electric windows cars, I'd have an accident on a bridge or along a body of water, my car would break through the safety barriers and would plunge into the dark icy waters.  I'd try in vain to open the door, but deformation from the crash would make that impossible.  The waters would flood the car electrics also stopping the electric windows from functioning.  So, as I sit in the rapidly filling car I would curse the day I stopped using cars with manual windows.  You'll be pleased to know that I did get over my irrational fear it's now over 5 years since I began using cars with electric windows and I'm still here.

It's security stupid

When I look at the recent hoo-ha surrounding the security vulnerabilities discovered in Google Wallet it makes me think that others might too be suffering from an irrational fear.

As a consumer we place our trust in retailers to provide the services and products we require to a service level that we expect. A retail store provides a slick and well presented mechanism to deliver products to the public in a fast, effective and secure manner. However, behind the scenes the technology that underpins this process can be woefully insecure.

It is reported that a major European retailer is breached every week and the reason we do not hear about it……the retailer does not know about the breach themselves. In the past five years there have been a number of high profile cases of card data theft from retailer systems including security breaches of high profile businesses resulting in data loss. These breaches have resulted in large fines being imposed and a loss of reputation for the business in question. However, the impact to us as the consumer is often more painful. The thought of your personal details being used by fraudsters to gain benefit because the retailer you trusted has failed to protect you in the most basic way, can be frustrating. That basic principle is to keep your personal information, your credit or debit card secure and safe from prying eyes and with over 165 millions cards in operation in the UK alone that proves a significant challenge.

As the social media frenzy spirals on, the challenge for businesses trying to incorporate social networks into their overall marketing strategy intensifies.

Fuelled by mobile devices, which give users access wherever they are and whenever they want it, social networks will continue to become an integral part of our lives. And with it, our expectations will grow. Consumers will expect a unique experience, offers, rewards and games in return for their engagement with a brand through social networks. Although this presents a challenge to organisations, the opportunities to reach their consumers and target them with relevant communications at the right time, opens up further. Facebook is already allowing retailers to offer customer promotions specific to location when users “check-in” via facebook places. Not only does this make the offer more significant to the consumer’s location, the message is far reaching, as users also broadcast the offer to friends through the network.

Well as usual, I attended PCI London this week, which is probably my fourth or fifth one over the years. As always it was very well attended, which was encouraging as it demonstrates that merchants, schemes and service providers continue to treat security seriously, even in these difficult times.

It has been interesting to see the changes in approach.

Initially at my first one, the event had an educational bias. “What is PCI DSS, who does it impact, what does it mean?”

Then it moved to a more supplier centric focus, with many presentations talking about technology and solutions which would allow a merchant to meet a variety of controls within the standard.

Recently I saw an example of a business using social media to provide outstanding customer service and enhance its brand image. The Dutch airline KLM presented gifts to customers who had mentioned KLM to the world via Twitter prior to boarding the flight. These customers seemed pleasantly surprised that KLM airport staff not only knew they had tweeted, but also knew their interests and the type of gift they would like. They knew all of this because they had a team of people monitoring social network feeds for mentions of their brand. They then looked up the social network profile of these brand advocates to establish their interests, purchased the gifts and presented them to the customer within hours of the tweet or facebook post. The fitness enthusiast was more than pleased to receive a GPS heart rate monitor watch, and the music aficionado an iTunes voucher. One would assume this then lead to more tweets about the “KLM Surprise”, and a very happy customer who would most likely pick KLM as their airline of choice in the future. So, for KLM, mission accomplished. A happy, loyal customer and free positive PR for the brand.

Our latest research for The Logic Group shows that, of those of us who are members of loyalty schemes, an impressive 69% are satisfied with them and only 5% dissatisfied.

What the research also finds is that the British consumer is a contrary creature who at once accepts the rewards that loyalty schemes bestow on them, while rejecting the mechanisms that make these rewards useful.

So the question remains: will consumers ever be happy with loyalty schemes?

Like many people out there, I stood on my bathroom scales a few days after Christmas, and after pushing my belly to one side in order to read the dial, decided that this year has got to be the year that I do something about shifting those excess pounds. Yes I’d promised myself in previous years that I would lose weight and get fitter, but never really got round to it, always finding other ‘More Important’ things to concentrate on. But this year I simply have to act.

I wonder how many IT Directors or Heads of Finance are wondering the same sort of thing regarding PCI compliance? Having put it off for a few years in the hope it will just ‘Go away’, this year may just be the year they decide to face this challenge head on.

It’s a daunting prospect, and whilst for me, there is no more frightening word in the English Language than the word ‘Diet’ many business leaders may feel the same way about the word ‘Audit’.

So how do I go about it?

It’s not news that the advent of technologies such as social media has given the brands that we use unprecedented access to our lives.  Gone are the days when our only contact with a brand was on the high street.  These days they are emailing us, texting us, writing to us (but only if we’re ‘old school’) and even ‘reaching out’ to us via social media.

And many of us have happily jumped on the bandwagon, joining, for example, the Facebook groups of our favourite brands.  For instance, at the time of writing, 408,959 of us ‘like’ Marks & Spencers’ Facebook site, and 74,692 of us ‘like’ Debenhams.  We get to know more about the brand and its products, and if we’re lucky we get some useful discounts and offers for the products we like.  Most of us know that the trade-off for these ‘perks’ is the brand knowing more about who we are, and what kind of products/brands we like.   Brands that engage with us in this way are effectively offering financial incentives to gain greater proximity to our lives.