Managing Ecommerce Risk to Increase Monthly Revenue

Three ways for your marketplace business to grow and profit



We work with numerous marketplace businesses around the world, providing them with best-in-class identity verification solutions, enabling trust and safety teams to do their job more effectively and efficiently. Our definition of a marketplace business is simple:

A platform for two populations (e.g. supply/demand) to interact. The nature of these interactions could be for the purposes of commerce, the sharing of ideas, or the exchanging of goods.

Marketplace businesses are unique for many reasons. They have completely disrupted the ecommerce industry as we know it, setting a precedent that interacting with strangers is acceptable while giving fraudsters a new way to disrupt business by acting as a buyer and/or seller.

For these reasons (and many more), a business marketplace should have dedicated a team for trust and safety. Whereas a traditional ecommerce company worries about things such as logistics and inventory, a marketplace business is more concerned about the legitimacy of interactions between strangers. For example: does the house listed for rent really exist? Is the driver reputable? Can you trust the contractor who was matched to repair a home?

Although the business problems marketplace businesses face are complex, there is one commonality that they all strive to succeed at: customer engagement and experience. In this competitive landscape, if you can master this one thing, the positive impact leads to the ultimate goal of growth and profitability.

So, how exactly can this be done?

We work with six of the top 10 global marketplace businesses. Below are some commonalities we see among them that have led to success.

Global data and compliance

Expanding global reach is top of mind for many of our marketplace business customers. Having established themselves in the U.S. and European markets, many of our customers are exploring Latin America, Asia and India.

The challenge comes in maintaining their reputation for trust and safety while onboarding users outside Europe and U.S. regulations and data standards. Successful global marketplaces have found a way to expand signup opportunities without reducing the information they receive, particularly in countries where data may not be as readily available.

For example, in the U.S., state, city, postal code and email are often enough to corroborate user identity, especially when combined with the last four digits of the social security number. However, outside of the U.S., a full address is a better distinguisher. In the U.S, many of our business marketplace customers have been able to auto-verify an identity without a government ID, but requiring a government ID is still best practice overseas.

It is critical to understand GDPR, PSD2 and other new international data privacy regulations to reconcile the data privacy of users with the amount of data required to provide a safe experience and verify user identity.

Robust preauthorization tools

Payment processing and transaction fraud is top of mind for many of our business marketplace customers. The most successful companies have honed in on this process and implemented preauthorization tools.

We spoke to one customer who spent $24 million on payments in 2018, with 80% of that going to interchange fees. However, despite the high fees, the company was extremely unimpressed with its payment provider’s built-in transaction fraud prevention tool. Not only was the fraud prevention team spending a full day at the end of every month on reconciling bad payments that had been incorrectly approved, they also didn’t have any insight into the “black box” output score given to them by their payment provider’s tool.

The best way to avoid getting hit with these expensive fees and charges is to have a robust preauthorization tool to vet users before they get to the transaction stage. (Learn more: Ekata Transaction Risk API)

A layered approach

The types of risk marketplace businesses face change at each stage of growth. As they grow, there is one thing that is certain: fraudsters and other bad actors will be keeping an eye out for ways to profit. Trust and safety is a key differentiator to keep the business growing. There is no better way to keep your platform safe and know your customers than having a robust fraud prevention strategy.

We find that our most successful customers take a multi-layered approach to tackle fraud and risk. This means using several tools to build a profile around each and every customer to verify their legitimacy. You won’t fully know your customers (and be able to determine if they are good or bad) unless you have done a deep analysis of their behaviors, historical patterns, transaction history, and validation of the data they have shared with you (name, phone, email, etc.).

Products like Ekata Identity Check API can help you build this story to verify identities, maximizing customer engagement and providing a positive experience.

As we’ve gained insight into the fraud prevention needs of marketplace companies at various stages of growth, we’re better able to refine our tools to serve them. Of course, providing a frictionless user experience while preventing fraud is always a top priority for our customers. This is a delicate balance that changes for each marketplace business as it scales. As the industry matures, the emerging trends require solutions more sophisticated than the fraud attempts. We continually listen and learn from our customers, to refine our products and best serve their needs.

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