2016: The Year of Consumer-Centric Fraud Prevention

It’s been a busy year for e-commerce. The convenience and choice available with online shopping continues to win more buyers, and this year for the first time the National Retail Federation reported that on Thanksgiving weekend, more people shopped online than in stores.

How can retailers ensure that their store remains attractive and competitive as we head into a new year? Make sure that every element contributing to the customer’s experience of your website is designed to make that experience as smooth and enjoyable as possible. And that includes fraud prevention.

Always Be Closing

It might not seem intuitive to think about fraud prevention in this way, but the fact is that ultimately, it’s all about sales. Fraud prevention isn’t different in this respect from anything else that impacts on the shopping experience, but retailers often fail to consider it from this perspective because fraud prevention has traditionally been perceived as all about loss avoidance.

In today’s real-time world, when customer expectations have never been higher and competition is fierce, e-commerce merchants have to wake up to the fact that fraud prevention affects checkout and conversions and make sure that it’s helping to increase sales, not discourage them.

In 2016, online retailers must start treating fraud prevention as a part of the customer experience, and making sure that it is optimized to create a good experience for good customers, as well as blocking bad ones.

Remove Friction From Checkout

Many of the fraud prevention methods and tools on which e-commerce merchants rely introduce friction into the checkout process. Requests for additional identifying information and delays in confirmation and fulfillment caused by manual reviews of transactions all make for poor customer experience. Merchants are becoming aware of this, and will start to act on that awareness.

Given that an impressive 49% of online shoppers consistently consider Amazon when making an online purchase, it’s not surprising that 1-click has set new norms when it comes to customer expectations of how easy it should be to make a purchase. Retailers can make their checkout process fast and easy with intelligent, automated fraud prevention which uses cutting edge technology.

A Real-Time Reality

The prevailing consumer culture is one of instant gratification, and that means that merchants are obliged to make everything about their site compatible with those demands. If 40% of people abandon a website that takes more than 3 seconds to load, as Kissmetrics have reported, then retailers can’t afford anything that adds delay on their website. That means that fraud prevention has to become real-time.

Until recently this was a dream rather than a true possibility, because fraud prevention necessarily relied heavily on slow manual reviews, which were bound to introduce delays. But the latest technology means that full automation is now not only possible but already employed by forward-thinking retailers.

Automation Ahead

Automation is what makes possible many of the current trends in fraud prevention, and retailers who aren’t yet benefiting from its abilities should upgrade as soon as possible.

Full automation means no more manual reviews – which in turn means quicker, smoother checkout and faster fulfillment – and also removes much of the burden from the fraud team, who no longer have to worry about the floods of orders that come in during busy holiday periods, or over weekends.

With machine learning, a fraud prevention system can learn from every transaction, becoming increasingly tailored to a retailer’s needs over time and recognizing new fraud techniques almost as soon as they appear. That means an end to the laborious work of adding rules to rules engines, and a beginning to fraud prevention which is far more flexible and accurate.

Be Accurate, Not Risk-Averse

Due to the high cost of fraud, fraud prevention has typically been conservative. But retailers are starting to wake up to the fact that this approach is a sure way to lose good customers.

Overly cautious rules reject genuine transactions as being too risky. People are far more complex than such simple rules can handle, and the result is “false positives” – the term given to good customers unjustly turned away as too risky.

The other word used for these customers is “insulted” – because the experience of being suspected of fraud is not a pleasant one, and customers find it uncomfortable and upsetting. In fact, a MasterCard study showed that nearly 20% of consumers who experienced a fraud-related decline had no future spend on that card 6 months after the decline event.

Retailers should treat customers as “innocent until proven guilty” to improve customer experience and conversions – both now and in the future. A great experience can turn a shopper into a customer for life, just as a bad one can send them straight to your competitors.

Make Fraud Prevention Consumer-Centric in 2016

Whether we’re talking about how fraud prevention can make checkout smoother and faster, or improve fulfillment times, or contribute to a great customer experience, or be part of the real-time service you want your customers to have, we’re really talking about parts of one coherent picture.

What matters with fraud prevention, as with every other aspect of your business that touches your customers, is that it provide the ideal shopping experience. Fraud prevention has not traditionally been considered a part of that priority, but new technology and the new realities of e-commerce have changed both what is possible and what is necessary to stay competitive.

This year, online retailers must start to make their fraud prevention consumer-centric. It’s what is best for sales, best for stopping fraud, and best for customers.

Bill Zielke is the CMO of Forter

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