Future Leadership: Will Online Fraud Eventually Kill E-Commerce Business?-06.24.25

by Peter A. Arthur-Smith

“Years ago experts chose digital over analog systems to become our default mode for the computer world – probably based upon cheapness-efficiency logic.”

It’s interesting to note that 30+ years ago there was a battle royal between digital and analog computer information systems. Having been exposed in a limited way to voice recognition/analog in the past compared to digital systems and the possibilities of voice/coding access, one begins to wonder whether the digital win was the best decision. Unfortunately the digital lobby won out.

As we enter an era of at least eight digit codes with diverse random characters to authenticate our online activities, which are impossible to remember, perhaps we’re faced with another decision point. The tremendous push to digitize everything in the hope of minimizing “dumb” human participation, as well as in the drive for profits and efficiency, is likely causing increasing amounts of user frustration. Along with this, is the key issue of rampant online fraud that organizations are grappling with at every level. They in turn drive their users crazy with all their security demands. Could it be that digitization versus analog systems, with the former’s relatively efficient engineering, has enabled fraudsters to thrive?

One can imagine that with voice recognition systems, with all its personally unique possibilities, that it would make life that more difficult for fraudsters – especially foreign actors. It’s a question of whether we could simplify our lives by making voice requests – we already have that with our mobile phones and robotic assistants – Hello Siri! It would be far easier to talk at your gizmo than having to remember an eight digit mixed code. I don’t know about you, but few of us have that genius capability.

Have you been rattled lately by having to go through three or more levels of securitization so as to prove your authenticity? It’s almost as if you need two computers, side by side, to toggle between different proving systems. Another recent experience really got me thinking! Why isn’t there a human to help, who can use their judgment and discretion? Bah! It’s Wall Street, of course, in its drive for efficiency and profits, no matter what. To hell with human frustration! The people who make those system-profit decisions don’t really  care.

It took us a long time to get here and maybe it will take a while to change our approach. Something has to give somewhere, because the current trend toward using digital authentication is growing in leaps and bounds and is making life more complicated for everyone – maybe even impossible. No wonder so many people feel they’re getting stretched thin, as they have to deal with all these extra layers of authentication. Call in AI to solve the issue – wrong!

If you believe in human credibility at all, you can likely minimize the customer frustration and fraud prevention  through the following principles:

1) Customer Frustration – If finances are your top priority, then let the customer decide rather than view them as profit-efficiency fodder. You can organize three levels of customer service and allow them to pay accordingly:

Priority Customers –Premium value – Allow them access to expert staff to resolve their user challenges. This already happens with banking services (Private Clients). They pay extra to have staff coverage.

Value-added Customers – Permit them access to competent staff members for basic customer needs which they pay extra for as they go along.

Economy Customers – Allow them digital/voice recognition services to meet essential requirements.

2) Fraud Prevention – Instead of believing that robots/machines – including AI – are smarter than humans and therefore can detect fraudsters, which so far they cannot, you would be better off creating three levels of fraud detection –rather than driving people crazy with absurd security coding. Properly trained humans with their intuitive capacity will always be superior to machines in detecting likely fraud, because machines don’t possess intuition and they cannot “smell a rat” as per humans. Again, think in terms of a three tier approach:

Tier 1 – Allow competent machines to scan your financial systems on a daily basis.

Tier 2 – Have trained staff review your financial systems on a weekly basis.

Tier 3 – Have expert humans review all networks on a monthly basis, or by exception more frequently, to sniff out likely fraud.

Success with this approach should then be acknowledged at the highest levels within your venture in order for it to be taken seriously. Without realistic changes, it’s possible that companies may start giving up on e-commerce, because the fraud price is too high.

So don’t turn to technologists with their efficiency arguments – i.e. replace humans with machines – to sell their solutions. This is false economy.  Instead, we need to encourage our technologists to be more realistic and actually work in true partnership with humans rather than dispense with them. Otherwise, we’re just playing into the hands of Wall Street and its dump humans messaging! We don’t benefit from the efficiencies gained – that just goes into Wall Street members’ (including shareholders) pockets. Efficiency is the current Wall Street preferred word for profits!