The Future Of Retail: Leveraging Transaction Monitoring In 2024 And Beyond

Transaction monitoring is an important process that helps retailers comply with all legal requirements, most importantly, anti-money laundering (AML) regulations. It monitors real time transactions to see if any suspicious behaviors should be reported to the financial authorities.  

It is essential if you want to protect your brand’s reputation and make sure that your customers can put their full trust in you. This is even more important in the retail industry since your company’s reputation will also impact the first impression a new customers will have on your business. 

In this article, we will dive deeper into learning more about the future of retail, and how transaction monitoring is leveraged and integrated into new technologies. 

More Accurate Customer Insights

Transaction monitoring tools are evolving to such a point where they can provide highly accurate data regarding customer behavior. They can distinguish normal behavior from suspicious ones, which makes it easy for them to detect criminal activities. 

Retailers can integrate real-time transaction monitoring with other data sources, and get a better understanding of customer’s purchasing behaviors, preferences, and engagement levels. 

Customer behavior analysis works by creating customer profiles that allow you to compare previous and current behaviors of customers. For example, if your customer is regularly buying one product, but suddenly buys ten, there might be something suspicious going, and the data will help you find out what it is. 

The very first step organizations need to follow to understand the data they gather from their customer analysis is to answer the following questions: 

  • Knowing if your data is high-quality– this helps in giving you additional insights
  • What do you need to improve your data quality and intelligence? 
  • Can you use data analytics to identify patterns? 
  • Can you integrate data from different sources (historical behaviors, customers and suppliers, etc)? 
  • Can you segment your customers? 

It’s important that you answer all of these questions to gain more accurate information regarding your customer insights, but it’s important that you can already identify both risks and opportunities for structuring your data to promote accurate and consistent results that improve over time. 

Fraud detection and prevention

Fraud is a common problem the entire online world is dealing with, and to be honest, it’s nothing fun to deal with. The retail industry itself is suffering around $100 billion losses a year from fraud. If you don’t prepare for fraud, it can get to you faster than you may think. 

Transaction monitoring services help you automatically spot any suspicious transactions that include unusual account activity, or even high-value cash deposits. All transaction data is recorded and analyzed to find any money laundering or fraud activity. The system will create a set of rules that will either block risky actions, or assess a fraud score that you can rely on. 

When it comes to detecting fraud, transaction monitoring systems are important because they allow you to: 

  • Remaining compliant: Complying with rules set by financial authorities regarding anti-money laundering (AML) regulations. 
  • Flagging unusual transactions: That will lead to fraud or any other criminal activities. 
  • Managing customer accounts: Reduces time consumption and reduces overhead expenses. 
  • Reduces loads from the manual review team: Transactions can be flagged by the AML tool without needing any intervention from your side. 

Therefore, if you want to save your retail reputation, you need to make sure you are ready if an attack does occur, or have such strong security measures that it doesn’t allow it to happen. 

Compliance With Anti-money Laundering (AML) Financial Regulations

Remaining compliant with AML financial regulations should be a priority for businesses of all sizes in every industry. AML tools can meet regulatory obligations by continuously monitoring transactions and flagging any suspicious behaviors that meet predefined criteria needed for further investigation. 

Financial regulators will always evolve the way they assess compliance with their rules, but their regulatory focus as of 2023 include monitoring if businesses have: 

  • Use of Anti-Money Laundering (AML) tools 
  • Checking up on fraud models, operations, and investigation processes 
  • Fraud conducted in the internal team (internal corruption)
  • Cybersecurity risk management 

These systems help businesses strengthen their ability to report and identify suspicious transactions that can cause reputational damage to a business and increase the risk of facing financial penalties. Therefore, regularly update and refine the rules based on the regulatory changes and the best practices in the retail industry to make sure you are remaining compliant and tackling evolving risks. 

Compliance with data privacy regulators

When it comes to data privacy regulators, it’s important that AML transaction monitoring systems comply with data privacy regulators. You are collecting data that you need to make sure isn’t going against data privacy regulators like the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA). 

Retailers need to make sure that transactional data is securely collected, stored, and processed while maintaining transparency and allowing customers to gain entire control over their personal information. 

Complying with data privacy regulators will depend on which region you live in. The GDPR, for instance, is an EU-wide data privacy law that strengthens individuals rights and access to their personal information in the digital age. 

It extends beyond EU borders, requiring all businesses that sell a product or service to an EU citizen, to comply with the GDPR. This means that even if you live in Canada, but sell to an EU citizen, you’ll still need to comply with these regulations. 

AML tools heavily rely on personal data, such as identifying customer’s personal ID, transaction details, and analyzing suspicious behaviors. All financial institutions need to collect and process this data for fulfilling their AML obligations. Sometimes, processing personal data in AML can create conflicts with GDPR restrictions, and let’s not forget, the GDPR has some serious restrictions on how data is collected, stored, and processed. 

When using AML transaction monitoring, here are the rules you need to follow to remain compliant: 

  • Data Minimization: You should only process the minimum amount of personal data required for your transaction monitoring system. 
  • Obtaining proper consent: Consent should be given to individuals, allowing them to freely have the right to withdraw consent when needed.
  • Data Retention: Data can only be retained for a certain period of time. Individuals have the right to request their data from being deleted whenever they want. 

In order to comply with the GDPR, financial institutions are establishing legal ground for processing sensitive information that follows all GDPR guidelines. Monitoring transactions are part of AML activities, so making sure you remain compliant is important. 

Integration with Augmented and Virtual Reality (AR & VR) technologies

The retail industry is expanding quickly, and new technologies are making it easier for you to reach your customers like never before. In fact, it’s expected to grow by 10.77% , and reach a projected market volume of $58.1 Billion by 2028. 

Some current emerging technologies include Augmented Reality (AR), and Virtual Reality (VR). Both AR and VR are technologies that allow customers to interact with a product or service in a virtual setting, which not only improves customer satisfaction, but makes the purchasing experience much more interesting. 

AR allows customers to try on clothes or accessories virtually, providing a unique shopping experience and giving you options to make better decisions when purchasing a new item. AR technology is used for product visualization experiences for customers. 

On the other hand, we have Virtual Reality (VR) which is a technology that creates a simulated experience that can be similar or different from the real world. With VR, you put on a headset that puts you in a virtual world, where you can interact with your product or service, similar to if you did so in real life. 

VR technology is an excellent emerging technology, since it is changing the way we shop, and saving us time from having to physically go to the store and buy items. 

Retailers can generate real-time transaction data with VR and AR technologies, and through this data, they can track important key metrics like product usage, inventory levels, and even personalize purchasing experiences. The good part is that security concerns around VR and AR payments are low. 

Transaction monitoring is continuously evolving in the retail industry 

Transaction monitoring will continue to evolve and play an important role in shaping the future of the retail industry by providing you with more accurate customer insights, personalized experiences, and improving your fraud prevention measures against online attackers. 

Retailers that are using transaction monitoring systems from now are gaining a competitive advantage over competitors and making sure your customers are safe and have the best shopping experience. 

Contributed byTony Ademi is a freelance SEO content and copywriter. For roughly four years, Tony has managed to write more than 500 SEO-optimized articles and most of them have ranked #1 on Google. When writing, Tony’s main focus is to carefully do research and make sure that his content is high-quality.

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