In an ever-competitive market and in a fluctuating global economy, online retailers have to be strategic when it comes to staying on top of profit margins. Unfortunately, the only sure-fire way to improve margins is to raise prices or cut costs (or a combination of both). Since raising prices turns away customers, most online retailers choose to cut costs. However, before you start investigating different product packaging processes, or rewriting your returns policy, there is one way that online retailers can operate more efficiently and reducing unnecessary costs: Ecommerce fraud prevention.
Indeed, global ecommerce fraud is on the rise and so are its economic costs to online retailers. In fact, the loss is expected to reach $48B by the end of 2023, with North American merchants bearing the brunt, expected to account for 42% of the total loss. To read more into the types of ecommerce fraud affecting merchants (and consumers) around the world, as well as proven industry best practices into ecommerce fraud prevention, look no further than our recent blog.
Below, we explore four tips that ecommerce fraud prevention teams can utilize to ensure fraud prevention is a valued mission within their business.
Know your KPIs
According to the CyberSource Fraud Benchmark Study, 62% of merchants believe that their chargeback rate is their most important KPI. Therefore, if reducing chargeback rates are your biggest ecommerce fraud prevention focus, let’s take a step back and look at the bigger picture.
Do you know how many orders your ecommerce fraud prevention team is manually reviewing that end up accepted with no chargebacks? According to the above study, merchants find that they end up accepting 89% of all orders sent into manual review. There is a huge opportunity here to increase your auto-accept rate, which in turn fulfills orders faster, provides a better customer experience and reduces the total manual review cost. Tracking your auto-accept rate is easy. But there are other metrics you can track as well, including the number of transactions that are fulfilled within a certain period.
False positive/customer insult
You could theoretically catch all your chargebacks, but not without the detrimental effect of rejecting good customers (aka “false positives”).
Merchants believe that up to 10% of their rejected orders were good customers. Therefore, identifying what is causing your ecommerce fraud prevention team to reject good customers is an immediate way to increase revenue.
Furthermore, if your ecommerce fraud detection team had fewer orders to review, they may have more time to recheck rejected orders to find out what would have been a good transaction. Maybe they have time to save the order! If not, they can either accept that customer or help you re-evaluate what caused those good customers to be rejected. Presenting a reduction in lost revenue to your leadership will show you are focused on the bigger picture.
Optimize your ruleset
Many of us in the ecommerce fraud prevention game get caught in a reactive cycle. Indeed, there are days when we feel like the fraudsters are always five steps ahead of us. And we don’t figure it out until they have moved onto a new way around the ecommerce fraud detection rules we created.
Of course, this gut feeling is why we should always be evaluating the performance of our ruleset and preparing for the ecommerce fraud risks ahead. For example, is your company adding more digital SKUs? Is marketing launching a 20% off electronics promotion? Is there a new affiliate driving sales? Anyone dedicated to ecommerce fraud prevention needs to be aware of these things before they happen so that they can prepare.
The main goal of your company is to increase revenue. And your job in ecommerce fraud prevention is to make sure those sales are, in fact, good revenue. What kind of positive rules can you write to identify your good customers and get them out of your review queue? Imagine being able identify positive signals such as a match between the customer’s name with the customer-given email that was identified over two years ago, and that the IP address is under 10 miles from the shipping address.
Using sophisticated data science and machine learning, our Identity Engine provides match statuses and risk signals in one API call, enabling you to auto-accept those good customers.
Minimize use of free tools
Here are two things to consider when choosing your ecommerce fraud prevention tools:
- How much is your analysts’ time worth?
- How much revenue is lost from their inability to make a good decision with their current tools (or lack thereof)?
How much time does your manual review team spend searching 4-5 different free tools just to make a decision? More importantly still, just how confident are they with their decision? Would one or two paid tools with good service enable your ecommerce fraud detection team to make faster, more accurate decisions? The answer is always yes.
Good management empowers your team to get their job done with the best resources. Don’t shy away from paid tools, just because similar information is free on the internet. Nothing is truly free – it will cost you either in time or lost revenue – or both.
Never stop calculating your ROI
Did your ecommerce fraud prevention team thwart an attack on your business with your current tools? Calculate what that loss would have been if you didn’t have your current tools in place. Present that to your executive team so they can see how much money you are saving in ecommerce fraud loss. Don’t be shy and don’t wait for them to ask! They won’t know the value of what you are doing if you don’t tell them. And they may not understand why you are asking for an increase in the budget for more tools if you aren’t proving the true value of ecommerce fraud prevention to begin with.
Let us help you! We work with online retailers big and small and know our way around ecommerce fraud detection. Contact one of our experts today to learn how multi-layering ecommerce fraud prevention tools are the way to go.