ClearSale, has shared its second-annual consumer research report, “State of Consumer Attitudes on Ecommerce, Fraud & CX 2021.” The report compares this year’s results with the 2020 report findings. We sat down for an interview with Rafael Lourenco, EVP & Partner at ClearSale, to discuss the key actionable items merchants should know.
What is the biggest takeaway for merchants from the report?
Because the past year has accelerated the growth of ecommerce, everything is happening more quickly and on a much larger scale. With more ecommerce comes more fraud, and merchants need to come up with more ways to fight it. When we look at this year and what’s to come, there’s one word that comes to mind: opportunity.
As the effect from the past few years is finally beginning to settle, we see previously new shopping habits become more comfortable and familiar, and new shoppers narrowing down which businesses will become their staples. To take advantage of this opportunity to grow revenue and brand reputation, ecommerce merchants need to focus on providing an excellent, personalized customer experience — which includes their fraud protection.
What is an old assumption about preventing e-commerce fraud that the shift in consumer attitudes has made no longer valid, or even harmful?
Retailers who think that tightening their fraud control will protect their business could ultimately cause more harm than good. While it’s understandable for retailers to feel nervous about the influx of orders (that inevitably bring an influx of fraud along with it), tightening your fraud filters too much could potentially lead to false declines, which are almost always triggered by automated fraud prevention software.
With fraud filters, complex algorithms use common characteristics of fraud as inputs. They take information like location, delivery address, and shipping speed into account, but they go far beyond the basics as well. Credit card companies are reluctant to share the elements of their complex algorithms, but according to some reports, fraud detection systems can weigh up to 500 factors.
Recent security breaches and increasing sophistication among fraudsters have made financial institutions more assertive in their work to prevent fraud. Banks and credit card companies have expanded their fraud detection criteria in the hopes of capturing more bad transactions, but legitimate consumers have gotten swept up in the process as a consequence. This could have negative effects on attracting and maintaining a business’ customer base.
According to respondents in our survey, 66% of consumers said that if a merchant/website asked for extra documentation or personal information to verify an order, they were likely to abandon their purchase. If their order declined, 40% would never order with that online store again and 34% would post a negative comment on social media about the business.
What is the number one fraud prevention related CX mistake merchants are making right now?
Not enough merchants are focusing on the customer journey during the checkout process. With ecommerce shopping becoming the norm, having excellent online customer experience from start to finish (and beyond) is essential to converting new customers and retaining old ones. Consumers now are looking for easy and convenient shopping that also retains top-notch security measures that keep them safe.
According to our survey, consumers would abandon their purchases if shipping was too expensive or would take too long (69%), there were extra costs/fees they weren’t aware of (51%), they didn’t trust the site with their credit card information (36%), the checkout process was too long and complicated (35%), the site wanted them to create an account before completing the purchase (32%), and their credit card was declined (9%). Knowing that a significant portion of consumers would abandon their purchase because of friction in the checkout process, merchants should really focus on smoothing out the customer journey during checkout to keep their shoppers converting and returning.
What is the most important tactical decision companies can make to strike the right balance between security and consumer privacy?
Retailers should avoid auto-decline and deny lists from automated fraud systems. Similar to how personalization is essential for the shopping experience, it’s also important for a business’ fraud prevention strategy to take into account each customer’s individual situation. Unfortunately, many ecommerce businesses use broad fraud rules as a “set it and forget it” approach. As a consequence, they lose out on a large portion of shoppers who expect personalization throughout the entire online experience.
Companies should also consider supplementing their fraud prevention strategy with manual fraud review. Depending on their transaction volume, some ecommerce businesses can rely solely on manual fraud review, but manual review can become cumbersome and unsustainable as the business grows or a peak season hits. A trusted partner can help manually review high-risk orders and take the burden off of your employees.
How do merchants balance the needs for regulatory compliance and excellent customer experiences?
The first step is to know what is ahead of you: what compliance regulations exist and for what customers, and what your fraud landscape looks like specific to your product and industry.
There are three ways that fraud, specifically false declines, can affect your business:
- Loss in revenue. Each year, businesses in the US lose almost $118 billion to false declines alone.
- Dissatisfied customers. Unsurprisingly, customers who face fraud during the customer journey are more likely to think negatively about the business.
- Worsened company reputation. This is why it’s so important to balance your fraud protection with your customer experience strategy.
Second step is to look at your CX strategy for the entire buyer journey and implement what you can. See where your CX is falling short due to compliance and try other methods of providing a stellar experience to keep customers coming back. To ensure that consumers are receiving the same level of personalized customer experience online as they would in-store, while still being able to maintain compliance to local regulations, retailers can:
- Prioritize personalized messaging and support, such as providing ways to help customers deal with individual challenges they may be facing and allowing the businesses to provide guidance. Having more personalized support and communication with customers will go a long way in keeping both new and longtime customers.
- Provide real-time information on product availability and shipping. Having information on what products are in stock eases the pain for consumers of having to wait for a response about this information, or hearing that an item is out of stock after the order is placed. Also, having clear information on shipping options and pricing will reduce the chance of unhappy customers who run into surprises near the end of their checkout journey. Offering real-time tracking will allow customers to keep an eye on their package from the moment it ships to the minute it shows up on their doorstep. Happy customers are ones who feel more in control during the shipping process.
- Offer seamless checkout. By providing a fast and efficient checkout process that doesn’t feel intrusive or require too much customer information, shoppers will be more likely to not abandon their purchases. It is essential to offer alternative payment methods – such as digital wallets – and secure gateways – such as PayPal. Tailoring those methods based on the countries you sell in and their consumer behaviors will be key to attracting new customers and keeping old ones.
How can companies safely begin the journey of accepting alternative payment methods at scale?
The first step in selecting alternative payments for your ecommerce site is recognizing that you should choose more than one method. Today’s consumers want options and the freedom to decide which payment method works for them. If they don’t see their preferred option immediately, they can very easily find someone who does. It’s important for businesses to know what their target customers like and select the right combination of payment methods accordingly.
When making these selections, retailers should be asking themselves questions such as:
- Which of these payments methods is your target customer most likely to use?
- What ecommerce features do these methods need to support?
- What security do these methods include, for both you and the customer?
- What is the right number of payment methods to offer without unnecessarily complicating your checkout area?
- Which of these payment methods integrate with existing revenue management software?
- Which methods use popular APMs to attract more customers?
The second step is to evaluate what your new fraud risk will be by offering these additional payment methods. Whether that means strengthening your internal fraud team or finding a outsourced fraud partner, being prepared for the new payment methods and their different risk potentials will keep you and your customers safe against fraud.