Challenge

When Karta launched Special with the Stripe Payment Element, its risk, trust, and safety teams were conscious that digital gift cards could pose a lucrative target for fraudulent actors and damage its highly trusted brand. As a result, Karta needed to seamlessly integrate risk mitigation processes with minimal to no impact on customer experience.

Solution

Stripe professional services partnered with Special for a 12-week payment-fraud strategy advisory to build and refine its trust and safety processes. Special opted for an extended timeline to include monitoring periods between each phase of the engagement to adjust the risk appetite against real data points based on actions taken.

Threat modelling and establishing user personas

Stripe’s approach started with a threat modelling exercise to analyse Special’s individual risk exposure and determine its risk appetite. Following this exercise, the team created user personas based on long-term buyer behaviour and seasonality to create a risk matrix of likelihood and impact and prioritise a list of potential actions.

For instance, Special established a manual review process in Stripe Radar for Fraud Teams to control interventions on a more granular level. For example, interventions may include manual reviews, 3DS, and additional data verifications. Over time, the initial user personas were tuned and adjusted by building user trust scores in addition to Radar’s charge-level risk scoring.

Reducing overall chargebacks

Chargebacks often occur when goods are not received. So in the case of digital wallets, chargeback volume should be lower than that of physical goods due to direct digital delivery. However, digital gift cards can be a more likely target for fraud because they allow money to be moved anonymously.

Due to this threat, Special wanted to focus on a strategy to eliminate chargebacks resulting from fraudulent activity. Adding friction in the right places throughout the customer journey is vital to impeding fraudulent actors. By focusing on chargeback likelihood and the resulting risk exposure as a factor from pre- to post-purchase, Special could reduce chargebacks significantly.

Stripe professional services worked directly with Special’s engineering teams to improve the payment integration and make the experience as smooth as possible. This freed up Special’s trust and safety team to spend more time fine-tuning preventative measures.

Results

Special established a strong trust and safety process immediately after launch, which led to positive end-customer sentiment, helping to support its brand vision––happiness. With fraud and general dispute levels below 0.1%, Special experienced virtually zero issuer declines due to potentially fraudulent transactions, resulting in a 9% increase in authorisation rate. With fraud rates now significantly below industry averages and far below the dispute and fraud thresholds of card monitoring programs, Special gained the flexibility and confidence to experiment with sales events and promotions rather than solely focusing its efforts on fraud prevention.