In our original research report, State of Consumer Attitudes on Ecommerce, Fraud & CX 2021 we discovered:
- Not all consumers are familiar with ecommerce shopping. About 13% made their first purchase online during the pandemic.
- Preferred payment methods are shifting as new generations enter the market. Only 20% of shoppers under 55 have their credit card handy when they shop online.
- For consumers aged 65 and older, less is more when it comes to product suggestions. Just 11% of those shoppers rely on personalized experiences to make purchasing decisions.
- Friction is a critical factor. If your checkout process is too complex or takes too long, 35% of online shoppers will mostly likely give up and leave.
- Speaking of customer experience, the worst thing you can do to a valid customer is decline their purchase. A whopping 40% of consumers will never shop with your company again after a false decline.
The pressure is on for enterprise businesses — today’s ecommerce environment has more customers with higher expectations, paired with more transactions with greater potential for fraud.
Teams Have to Field More Fraud Attempts
Undoubtedly, your fraud team has been busier over the past few years as fraudsters have taken advantage of the ecommerce boom with new tactics and schemes.
Among the biggest sources of fraud during the pandemic were COVID-19 scams, including COVID-19 testing scams, fake charity websites and imposters pretending to offer IRS stimulus checks. The Federal Trade Commission received nearly 5 million fraud reports from consumers in 2020 and 2021, equaling $3.5 billion in losses.
Expect that trend to continue.
A Juniper Research study entitled “Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2021-2025” estimates ecommerce payment fraud will exceed $206 billion cumulatively through 2025. Consumers know fraud exists. They read the headlines about data leaks. And they count on your business to protect them.
That’s where your fraud team comes in, with the help of tools like filters, approve and deny lists, and other tactics.
However, those tactics have inherent limits … which can cost you more than expect.
The High Cost of Limited Fraud Prevention
The best internal fraud teams use impeccable data gathering and analysis to become intimately familiar with existing customer patterns, peaks and troughs in traffic, and other aspects of their ecommerce landscape, all to spot anomalies more easily. They also likely have a finger on the pulse of industry-specific fraud trends.
But they’re still missing the remainder of the global fraud picture. And in a completely borderless digital landscape, if you’re operating in any kind of fraud data silo, you might not see what’s coming until it’s at your doorstep.
To accurately fight fraud, you need to recognize patterns and trends not just in your business or your industry, but throughout multiple other aggregators. To do otherwise is to risk revenue: Remember when we said 40% of customers won’t shop with you after a false decline? There’s a cost to your company when you turn away valid customers, which happens about 60% of the time. Specifically, every $1 in false declines translates to a $13 loss in revenue.
Why? Because you aren’t losing a single transaction — you’re losing the lifetime value of that customer.
“There’s a lifetime value of each customer that you lose when they’re not going to buy from you anymore. You might lose a sale for a $200 item. But that may be a customer who was going to shop with you five times over the course of a year. That’s $1,000. And over a lifetime of shopping, that could be $25,000 of lost revenue from one false decline.”
Happy customers — also known as “promoters” — potentially have a 1,400% higher customer lifetime value than a detractor. You definitely don’t want to lose those customers.
Here’s another factor that will make you wary of false declines: It takes 12 new customers to recoup the loss of one promoter. And the cost to gain new customers is about five to 25 times higher than simply retaining a customer.
So, when companies confidently say they have fraud under control, that may be technically correct, but how many valid transactions are they declining to keep their fraud rate low?
Put another way, when calculating the return on investment for your fraud prevention activities, are you factoring in the costs of false declines … and how they affect the customer experience?
Keep Your Customer Experience Top of Mind
Speaking of your customers, if there’s one thing every enterprise business absolutely must focus on when they sell online, it’s making sure the customer has a positive experience.
In our original research, we found consumers have increased their ecommerce spending and plan to continue doing so – as long as the experience is easy and seamless.
And there’s the rub.
Your customers have full lives and little time to waste when it comes to online shopping – especially when they can find the same or similar products somewhere else. As the world becomes their shopping mall, consumers are prioritizing a great experience and will gladly return again and again to a site that feels comfortable to them Enterprise ecommerce companies need to make it easy and intuitive for consumers to shop online. We’ll talk more about what that looks like in the next section.