Retailers can prevent e-commerce fraud with technology solutions.
Electronic commerce is experiencing unprecedented and much talked about growth. The global pandemic has sent people online in droves, accelerating a digital shift and advancing technological innovation that has been in the works for years. As a result, global e-commerce sales grew by 28% in 2020 to reach around $ 4.3 trillion. As consumers moved online, traditional retailers rushed to adapt, while online merchants stepped up their digital channels to meet growing demand.
The new reality of e-commerce is fiercely competitive and differentiation comes down to delivering a superior customer experience. Half of the clients around the world say customer experience is more important to them now than it was before the pandemic, and a similar percentage said a single bad experience would set them up against the competition.
As buyers’ patience wanes and the demand for faster and smoother payment processes, deliveries and returns increases, security remains a top concern. A recent and comprehensive investigation by Riskified, a provider of frictionless fraud management solutions for e-commerce, found that up to one in five global consumers have experienced fraud while shopping online in 2020. The majority of online merchants , 72%, recorded an increase in fraud attempts since the pandemic. started, with more than a third blaming fraud for losses of 5-10% of their income in 2020.
To understand current perceptions of the threat of e-commerce fraud, merchant and buyer blame and trust, Riskified surveyed 4,000 consumers and 400 retailers in the US, UK, France and Germany earlier this year. Despite a clear awareness of the growing threat of fraud (60% of retailers said they expected fraud attempts to continue to increase over the next year), more than half of all retailers have said they were confident in their ability to prevent fraud. Consumers, however, don’t seem to share that trust: only 34% said they trust the ability of retailers to prevent fraud.
The increase in the speed and complexity of online fraud means that merchants will find it difficult to protect their brands and retain customers. It also hampers the ability of merchants to deliver the streamlined experiences customers expect. The direct financial impact of fraud is compounded by the blow to customer confidence, who tend to blame merchants, not scammers, for the fraud they encounter while shopping online. According to the same survey, nearly three-quarters of fraud victims believe the retailer could have done more to protect them.
For many traders, there is another concern. Most rated the loss of income caused by fraud prevention methods as their “biggest problem”. Merchants in the UK and France ranked 3D Secure and other two-factor authentication protocols as having the greatest negative impact on revenue (with US and German merchants ranking it as the second most dangerous). Two-factor authentication stops a lot of fraudulent transactions, but the extra friction can drive away valuable customers.
Many online traders feel they have to make a tough trade-off, sacrificing growth and bottom line for safety or vice versa. But e-commerce doesn’t have to be a zero-sum game between fraud and friction. Technological innovations can help merchants balance the need to prevent fraud while minimizing friction and ensuring a smooth shopping journey. Retailers considering implementing these solutions may be wary of large investments during times of economic instability. But if there’s one thing the COVID-19 pandemic has made obvious to e-commerce, it’s that the time for digital optimization is now. Increasingly complex customer expectations, combined with the explosion of a new digital front, present an incredible opportunity to redefine strategy and build for the future.
Riskified’s e-trust report reveals the full survey results, including the dramatic difference between how retailers and consumers perceive the threat of e-commerce fraud. It describes the impact of fraud on customer confidence, business loyalty and merchant bottom line. Download your free copy today.
This post was created by Riskified with Insider Studios.