Managing fraud is a win for customers and merchants
Fraud is and has always been an unfortunate reality for both businesses and consumers alike. With more commerce moving online, fraud has become increasingly commonplace in the digital economy in recent years. Not just from scammers but also through the abuse of post-purchase customer rights protections such as chargebacks.
So-called ‘friendly fraud’ is a multi-billion dollar issue in Asia, and its prevalence is only increasing. This year, it’s expected chargebacks to reach volumes 47% higher than 2019 pre-pandemic levels.
This is a big issue for businesses in the region. Disputing fraudulent chargebacks is expensive and can negatively impact the bottom line – this is a big concern, especially for those businesses with tight operating margins. It also adds resource pressure with employees needing to fight disputes instead of focusing on more value-adding activities. That’s without considering the reputational impact fraud has on a business.
But that’s just the tip of the iceberg — if a business receives too many chargebacks, they may incur penalties from card providers. These penalties can increase the cost of payments processing. And in exceptional cases, it can even cause businesses to lose access to the card schemes, stopping them from accepting card payments.
However, there’s plenty that businesses can do to minimize the impact of fraud. E-commerce and retail fraud management is a balancing act of minimizing fraud while also maximizing sales conversions. Businesses need sufficient safeguards to detect and stop fraud without making the payment experience so tedious that they impede the shopping experience and cause customers to be lost. These safeguards also need to be accurate. Wrongly rejected legitimate payments also lose businesses money. These false declines cost merchants as much as $20 billion a year in lost revenue.
A Forrester report on the best practices for E-commerce and retail fraud management recommended a multi-layered strategy using risk-based authentication (RBA), behavioral biometrics (BB), and data sharing across an organization to maximize success.
This is one of the four primary components of an effective retail fraud management strategy: data integration, model management, investigation, and finally, reporting, auditing and dashboarding.
However, businesses need access to data to design an effective fraud management strategy. Research global payments provider, Checkout.com, found that 67% of merchants do not receive fraud and chargeback analysis data nor detailed response codes on failed payments. Without this data, these merchants cannot understand what’s happening in their payments ecosystem. This leaves them unable to make the necessary changes to increase performance, reduce fraud and capture more revenue.
Take Singapore-based e-commerce designer furniture and home furnishings retailer, HipVan, for example. Its payments acceptance rate rose by 5% thanks to understanding its data better. It also achieved a 15% reduction in processing fees — savings it passed to its customers.
“The data provided by Checkout.com is allowing us to use payments as a strategic growth lever across our business,” said Shobhit Datta, co-founder of HipVan. “This includes instant insights into the cost of payments, customer payment trends and overall payment performance, including detailed response codes on failed payments.”
Data doesn’t just describe customer behavior; it also provides information for the business. Checkout.com uses data to identify behavior patterns of genuine users and their transactions. It also deploys the latest authentication technology, 3DS, to ensure that customers are legitimate and not committing fraud.
“When it comes to payments, the key is to prevent it from trickling down and affecting the customer experience. Checkout.com is exceptionally proactive in identifying and flagging any issues early on and providing clear recommendations on the best way to tackle them, says Datta. “For instance, they’ve recently supported us to deploy 3D Secure to protect ourselves and our customers from fraud.”
The Checkout.com toolbox includes a variety of offerings to optimize every part of the payment journey using first-hand data and instant insights:
- Building risk profiles using machine learning or rules for different segments and criteria,
- Highly customizable risk rules by mix-and-matching properties to create rules that filter transactions based on a business’s requirements,
- Smart routing logic blocks fraud in line with Strong Customer Authentication (SCA) requirements while protecting conversion by using 3DS solutions to authenticate high-risk transactions,
- Tokenization securely stores and encrypts customers’ payment information on a PCI-compliant vault.
An effective fraud management strategy is a no-brainer if a business seeks to grow and thrive in a digitally-driven market. And the technology is already here to help merchants make smarter decisions, cut fraud, provide better pre-and post-purchase customer experiences, gain a competitive advantage, and boost the bottom line.
Request a demo with Checkout.com as a first step in building an ideal risk strategy that strikes the right balance between fraud prevention and approval rates. The company has a truly global offering, with 19 offices worldwide and thousands of clients, including SHEIN, Grab, Veepee, SONY Electronics, Getty Images, GetGo, Prism+, Shopback and Shopline.
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