Seasoned industry veterans can recall a time when a refund fraud investigation required the review of a vast number of receipts and participation in the “match the signature” game. The long, manual process was considered standard operating procedure for building a fraud case. Fortunately, technology has advanced over the years and we now have powerful tools for detection and prevention. The advances made with exception based reporting systems, digital video, and return verification technology have changed the game; for us and for the dishonest. As our detection methods have improved, the dishonest have also improved the sophistication of their schemes. This poses an interesting question; is technology a friend or foe?
In a time where human capital and resources are limited by strict and sometimes “bare bone” budgets, loss prevention technology is a vital part of our shrink reduction efforts. The use of technology has increased both our effectiveness and efficiency, playing a major role in the reduction of losses. Like most things, technology can work for both the good and the bad. The same ideas that help us detect loss are also being used by dishonest people to create “inventive” methods to steal. As we examine this curious relationship, let’s explore the darker side of tech usage.
We can start with the Internet. Originally designed as a military application for communication; it blossomed into the predicted “wave of the future” and perhaps the world standard for information gathering and collection. Unfortunately, the advance of e-commerce through the Internet also resulted in the advancement and ease at which to e-fence on a global level. No more standing on the corner “peddling” stolen goods or even finding a “fence” for your stolen product. The internet has become a favorite playground for thieves ranging from the organized to the single dishonest associate.
A new website appeared in August 2009 called www.employeediscounted.com, whose concept will allow a member to request merchandise for purchase from another member who will buy the merchandise using their employee discount. The store employee “member” can make a profit selling the purchased discounted merchandise to the requesting member. Although it currently appears that this site is not active, think about the concept. While some retailers already struggle with employee discount abuse or see it as a gray area, this website exacerbates the issue even further. This is one example of how the use of technology can diminish retailers’ profits and entice employees to make bad choices.
Advances in electronic payment processes have reduced our exposure to cash loss and seemingly increased a shopper’s ability to purchase. In past decades “check fraud” was an issue of alarming proportions, whereas today we seldom hear much concern as fewer shoppers use checks and check readers have become standard operating procedure. Moving toward an electronic or card based payment process however, we see that the same micro-readers that provide “cash and payment” security, have also generated if not direct problems, certainly concern. We have learned how easy it is to attach a micro-reader to an ATM, store register or even to carry on one’s person and collect information from unsuspecting consumers. These technologies have brought with them the challenges and headaches of meeting stricter regulations and standards including today’s Payment Card Industry (PCI) compliance requirements.
This brings me to data. The world has become obsessed with data and our industry is no different. Loss prevention processes have come to rely heavily on data analysis and key performance indicators. And of course, as valuable as data is to running our business, it has become equally valuable on the black market. It is no longer uncommon to read articles related to data breaches and at times it seems like thieves are more interested in our customer’s information than our product. These breaches and their effect on our customers have made data privacy and protection “top of mind” for most retailers and solution providers. Technology’s unexpected gift to the LP professional is the need to now be well versed in new state, federal and industry regulations.
Many loss prevention departments have already seen changes in their investigative process due to PCI compliance requirements, including the inability to access card information and delay in conducting proper investigations. As governments and agencies continue to protect data and enact data privacy protection regulations, we can only expect increasing restrictions to the visibility or access of data and information commonly used in our loss prevention endeavors. What started with credit card and payment information will now be migrating into various restrictions of personal, financial and commercial data.
As you look ahead in our industry, how do you think technology will support or deter our efforts in preventing theft and maintaining profitability for your organization or retail partner? How will future laws and regulations involving data and information restrict us from our ability to investigate and resolve issues? These are only a couple of the questions we are going to face and technology will most definitely be in the forefront of our discussions.
Although I cannot answer whether or not technology is truly a friend or foe, it is quite obvious that as we continue to build better mousetraps, that troublesome mouse is now building better cheese catching machines and often with a network of more mice.