never have to wait for review, worrying about whether the Christmas gifts they have ordered will arrive on time. Customers no longer have to wait for confirmation of their order, something that causes confusion at best and angry frustration at worst. In turn, that means that the retailer no longer has to field puzzled or irritated customer queries and complaints about the status of their unreviewed order. The confirmation element is especially important during sales. For example, on Black Friday and Cyber Monday it is common for online retailers to see that customers who do not receive instant confirmation cancel their order. The sales are only available for a short period, so if they can’t be sure that they’ve benefited on your site, they’ll go to a competitor rather than risk missing out. CONSUMER-CENTRIC FRAUD PREVENTION One key impact of real-time fraud prevention is a much improved customer experience. Customers have the whole internet to choose from, and are used to the convenience of checkouts like Amazon’s 1-click, so retailers have to provide a great experience to entice them to come, and to come back. Fraud prevention needs to become part of that conversation. Some traditional fraud prevention methods, such as 3D Secure, rely on intruding into the checkout process, and demanding further identifying information. Manual review delays confirmation and fulfillment. All of this is no longer acceptable. Even worse, conservative fraud prevention generally comes with the high price of “false positives” good customers mistakenly rejected as fraudulent. Inflexible rules reject customers who show signs associated with fraud - but real people don’t always fit into simple categories and norms. Genuine customers with complex buying stories don’t deserve to be rejected out of an over-abundance of caution. Customers should be “innocent until proven guilty,” something made possible by the latest technology which is accurate rather than risk-averse.
Retailers need machine learning, behavioral analytics and continual research to make sure they’re up to date with the latest consumer trends – and the latest fraudster techniques. Fraud prevention needs to become consumer-centric, just like the rest of the site aims to be. Anything less is selling the customer short - and making it less likely that they’ll return. MOBILE FRAUD PREVENTION Most merchants still don’t track fraud by channel, which means they’re not aware of the distinctions between mobile and e-commerce fraud. That’s unfortunate, because mobile commerce is significantly different in important ways, from checkout flow to the data that websites receive from customers. Fraud prevention needs to start optimizing for mobile, just like the rest of a website. According to IBM, mobile sales on Cyber Monday saw an increase of 27.8% compared to last year, becoming 25.9% of all online sales. With record mobile sales like that over the 2015 holiday period, that’s something that just can’t wait any longer. Fraudsters will take advantage of all the loopholes retailers leave them, while good customers annoyed by subpar experience will simply leave. INTERNATIONAL FRAUD PREVENTION Chinese e-commerce operations across borders is estimated to reach $1.02 trillion in 2016, and the number of China-based consumers buying U.S. brands online over the 2015 holiday season increased 7 times over 2014. Indian e-commerce imports are expected to grow 78% - and 27% of Indian orders are from US-based websites. These numbers are exciting enough that retailers who haven’t yet made the jump to global sales are starting to think about it and, in many cases, get ready. Of course, that has implications for fraud prevention too. Customers, both good and bad, behave differently depending on where they’re from – they have different behavioral norms, different priorities. Retailers are going to start judging fraud prevention on how well it deals
MOST MERCHANTS STILL DON’T TRACK FRAUD BY CHANNEL, WHICH MEANS THEY’RE NOT AWARE OF THE DISTINCTIONS BETWEEN MOBILE AND E-COMMERCE FRAUD.
with different customer behavior from different countries, and how well it is equipped to match the aims of the rest of the company when it comes to driving sales both domestically and abroad. INTEGRATED FRAUD PREVENTION All of this leads to the final point. As should be clear from this article, fraud prevention has a profound impact on diverse aspects of a business - from sales, to marketing, to customer support. All the marketing in the world won’t help a company enter a new market successfully if their fraud prevention rejects new customers as false positives because their new behavior patterns don’t match the domestic ones the system is used to. Sales won’t be happy to see conversion rates dip because the checkout process is too cumbersome, or because customers won’t wait for confirmation. And customer support won’t be happy to field hundreds of calls about missing confirmation emails, or delayed deliveries, caused by conservative fraud prevention. Fraud prevention has traditionally been siloed within companies, treated as an isolated issue. That has to stop and soon.
Payment Quarterly | Q1 2016
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