April 20, 2018
April 18, 2018
Posted December 1, 2017
In this episode Armen is joined by Vanita Pandey, VP of Product Marketing at ThreatMetrix. They explore the digital transformation of holiday eCommmerce, and how businesses must create seamless experiences in order to compete.
Armen: Hi, thanks for joining us on today’s edition of Digital identity 360. I’m sitting here today with Vanita Pandey, VP of Product Marketing and Strategy. Thanks for joining us today, Vanita.
Vanita: Thank you, Armen. Great to be here and look forward to our conversation.
Armen: Good. So you know what the audience can’t see is outside. It’s actually raining today; it’s sort of a rainy time of year. Feels like the holidays are fast approaching and sort of puts me into a bit shopping mood. So we’re gonna go deep on that theme today and talk about holiday 2017 shopping and put a slightly different spin on it, right?
Vanita: Absolutely. It’s not like it’s a minor drizzle. It’s pouring and I think if you were to go by the transaction volumes of Alibaba Singles’ Day that just passed or the Singles’ Day in general I think it’s gonna be a major downpour of transactions during the holiday season.
Armen: Alright, we are gonna go deep on the metaphor today.
Vanita: I think we’re done with the metaphor.
Armen: Alright, well let’s get into it, if we were to turn this around, obviously massive Singles’ Day that just took place. I haven’t seen the numbers but I guess what numbers have you seen from this…
Vanita: I saw that it was $25 billion in transaction for Alibaba itself in a 24-hour period. Just to put it in context I think the top ten e-commerce retailers across the globe, probably, not all of them have $25 billion in distal transactions individually. So, it’s a huge amount of volume that got cleared by one day.
Armen: That’s a big day of revenue for one company. That’s just phenomenal. Wow, that’s just massive scale … I remember some images last year of just, literally, the shipping rooms and the boxes. The volume is just of a scale that no one has ever seen before.
Vanita: Absolutely. I think the consumer behavior has definitely transformed. I mean, you have little kids … I have a young child and going out to the store to buy stuff is just so hard that I’m now buying toothpaste and toothbrushes online. So, it’s just getting to a point where…
Armen: Imagine that, I’m buying razors today online. Full convenience is that … yeah, it’s such a different experience. Taking care of all of my shopping needs through digital channels that I trust, right, and that’s, I think, that’s underlying ThreatMetrix can help. Sort of, the ecosystem of providing the space. So, let’s talk a little bit about that because as digital commerce proliferates, as a consumer I’m shopping not just at one merchant; I’m using multiple merchants. Sometimes these are merchants within the United States, sometimes outside of the United States but historically I think that might have been a challenge, right? To acquire buyers.
Vanita: It was and I have this interesting analogy. Years ago, I mean 10, 15 years ago, we were in Maryland and I wanted to go and shop at the malls for Black Friday. So we went in the middle of the night, sat outside, it was very cold; East coast gets cold. When the rush started and people rushed in I just didn’t have the guts to join. I just thought I was gonna die and I came home with nothing after waiting eight, nine hours. Then you realize the shopping has gone from being a sprint to a test match. It’s a five-day event; people shop throughout the year, Armen. You probably, your wife or yourself started shopping for holidays looking for deals because you have that constantly in your mind. Despite that, there is a secular trend and the transaction volumes are unprecedented and folks are preparing for the distal season. The retailers have shifted it forward and every year, I swear, I feel like Christmas has come a week earlier. The celebrations, the music, jingle start a bit earlier because people are trying to lure the audiences or customers.
Armen: Yeah, with the proliferation of promotions, every week my inbox … or every day my inbox fills. I heard one person describe it as; basically, it’s 364 days of promotions for one holiday. Yeah, I think the behavior has certainly changed.
Vanita: That’s absolutely true.
Armen: My expectation is, yeah, I can shop at any moment. Maybe, even several months in advance for an event that’s coming up and it needs to be easy and I as a consumer want to be able to interact with and buy from merchants around the world and have the same experience.
Vanita: Absolutely, and I think this is where you probably have an interesting perspective as a marketer. What happens is you might have shopped or been shopping throughout the year because it’s a 364 days of promotion as you said. But then during the holiday time you know that there’ll be deals so people are trying to go up. So there’s this loyalty component that has come in. Now how do you see business and what recommendations would you have or how do you think the companies are preparing? It’s not just about having inventory, it’s not just having the ability to ship it in time but it’s also about making sure the experience is great.
Armen: Yeah, and it’s moved me on price even. I think price generally speaking is no longer a competitive advantage, right? And it comes down to the experience, right? So, what does it mean by experience; I guess from where I stand just simple things like I love buying things from Zappos; the price isn’t always the best, but I know I can easily return. I probably abuse Zappos more than others because I’ll buy six or seven shoes then I gotta go return four or five of them.
Vanita: But you probably buy three times more than you would if…
Armen: I wouldn’t say me; it’s me and my wife, right. Literally it looks like a shoe store in our house right now. We’ve got boxes piled up but we will send back several of those. So, the experience of knowing that it’s going to be easy and seamless to get those boxes to the UPS store a mile from my house and not even have to think about following up because I know the credit’s gonna hit my credit card. It makes it simple and enjoyable to an extent, right? And it removes any of the angst from the equation and I know that I’m probably paying more than I would elsewhere and I’m fine with that.
Vanita: I think that’s a really interesting perspective, and the other thing that happened, if you remember, in 2010, 2011 there was this concept of, you don’t want people to fill out a lot of details because that causes abandonment and now that shifted to time. The whole concept of one click payment or no click payment; at some point we say they probably will see probably see my pupil dilate and then make the transactions because they think “I need it”. What do you think about the whole shift towards one-click payments, or the patent expiring?
Armen: Yeah, I think you’ve seen it too. There’s … everyone’s had strategies for the past several quarters so that when this D-day came, right, they’re ready to go. I think that it’s great for consumers, right. I think Amazon has done a great job educating the market of what seamless commerce can be. So I think it’s going to be a win for consumer. I think for the merchants it’s going to help them out, increasing volume. I think hopefully it will help move more mindsets to what other ways can merchants differentiate themselves beyond one click, right, beyond price. What are your thoughts?
Vanita: No, I agree. I think that the merchants aren’t in the business of payments. They’re not in the business of fraud. They’re in the business of doing what they do. So Zappos is in the business of selling shoes and making money out of it and I think the key is the world has become that consumers across the globe feel like they can transact anywhere. We were talking about it and you said “I might see something great in China and I might wanna buy it,” or people wanna buy stuff from wherever they can. You see interesting stuff and that convergence is happening. At the same time there is this underbelly of commerce, which is fraud. So they continue to … Fraudsters continue to exploit the fact that merchants are trying to go into seamless experience and trying to make it easy for consumers to buy. They’re trying to sneak in, pretending to be good customers and with the data breaches, with the amount of information available, the technology available. It’s unfortunately getting easier for anybody down the street to become a fraudster.
Armen: So we just published our third quarter Cybercrime Report big publication for ThreatMetrix. Without getting into the weeds on everything there. What is the single biggest insight that you can share, on this episode, as it relates to maybe fraud rings or fraudulent behavior patterns that you’ve seen?
Vanita: That’s a great, great question. We’ve seen … we keep talking about fraud evolving, and it’s very interconnected. We talk to a lot of customers across banks and merchants and there is a trend where identity testing happens on a charity; the transaction, the card is bought, or a payment transaction is quickly followed by on a retailer. Then they try to log on to someone’s bank account at a bank. So there is this … you can see the interconnectivity, and the network effect that ThreatMetrix delivers we’re able to find consistent patterns. So, every time there’s a breach we have this thing … we’ve been talking about how best can we, you know, promoted the identity abuse index, and we are able to see a fraud spike happen right after a breach. Even if the breach may or may not have been known. I’ve had analysts and customers ask me saying “There’s a spike here what is it that we’re missing, which breach is it that we haven’t found anything about”.
Armen: Yeah, I think that … I’ve seen that chart, it’s quite remarkable. If there’s a way we can monetize that…
Vanita: I know that’s the marketer thinking. You’ll have to find a way to do that. Apart from that, last quarter we had about 100 million attacks on e-commerce in itself. Just to put that in context; three years ago when we first did it the total attack was about 50 million. So, again, the e-commerce attacks have … are two times of the total network attack volume and we had a pretty sizeable network three years ago. We, obviously, have been growing. So we can see that the environment is getting riskier. At the same time, you spoke about it a few times, that consumer expectation is becoming much more intense. They want frictionless experience, but God forbid something goes wrong with their experience; they’ll hashtag it, they’ll put it on social media. How do you see retailers balancing that security versus experience versus delighting the customer?
Armen: From what I’m seeing its becoming embedded across the organization. There’s not just a fraud team thinking about how to stop fraudulent behavior. I think the business unit owners, from what I’ve seen and experienced, are thinking about this and it starts with the customer experience, right.
Armen: I think that’s number one. Number two; God forbid something’s going to happen to everybody, right, to every merchant out there. At some point in time, right, and I think it’s how you handle that that matters most, right. Our philosophy has been; we do live in a post breach world, right. And we see now more and more merchants rapidly adopting risk based authentication frameworks to counter some of that proliferation of credentials up for sale. I’d say even above and beyond that when something goes sideways the communications … how quick the communication comes out, how transparent it is, what’s being done to make it right is also very helpful.
Vanita: Absolutely. I think another thing we’ve seen, which is surprising, and I think it’s gonna be very important in the holiday season is there are slackers and I’m probably one of them, who don’t buy gifts or they realize that you show up and somebody bought a gift for you and you’re like “Oh, my god I needed to buy them a gift too,” and the gift cards have become this life saver for people like me and in others who may or may not want to spend the time looking for the perfect gift. Now that is a big exploitation area for fraudsters and we’ve chatted about it too. There’s a big push towards a fungible asset. They can steal a card, buy a gift card and you can resell it, it’s a great feat. From a merchant perspective they can’t recognize the revenue until the gift card is monetized. Do you see any interesting patterns evolving around that or other non-traditional forms of gifting this holiday season?
Armen: Well, its funny, so at Money20/20 we, I don’t know if you’re aware of this, but we sat down with branded prepaid card association, which I didn’t even know was a thing but there’s a whole board around this. It’s all the major merchants and their branded cards. Yes, this is what they talked about; this is one of the core themes that they talk about is given this is effectively an alternate form of currency that has different revenue recognition, models in place, where breakage is part of that model. Yet, still, it’s potentially exploitable for fraud rings. Without getting into the weeds I do know there was a very rich discussion there. I wasn’t actually at the meeting, John was, but there was a very rich discussion there around how can risk-based authentication mechanisms help root out and detect. Detect the patterns that appear to be exploiting bad outcomes.
Vanita: Absolutely, and I think that’s gonna be very interesting to watch because when the card transactions first started or e-commerce transactions started it was funded by cards and there is the consumer protection mechanism in place; you can dispute a transaction or do things around that’s claw back possibility, which doesn’t exist in these transaction types. Or if you have something directly linked to your bank account there is an instant loss that happens. The consumers suffer a bit more in that. It’s like losing a prepaid card is like dropping cash on the street and you don’t realize it.
Armen: So, I know you just went through some predictions and what would the number one prediction that you’re looking at, for either 2018 or through this shopping season. What would that one nugget be that you’d want to share with the audience?
Vanita: I think that the one big nugget, from my perspective and it’s got nothing to do with the discussion we’ve had until now. I think more and more we’ll see that cyber crime is going to be a funding source for cyber terrorism or terrorism in general; we’re seeing that trend. I think we’ll hear more about that next year and that’s something, which is where the companies have to be extra vigilant and you probably have a brand perspective out there. You don’t want your name associated with a news story like that. But it’s going to be something that is becoming more and more prevalent.
Armen: Alright, well we’ve talked about some dark issues that have been very cloudy and rainy but there’s a silver lining. The sun will come out despite all these negative aspects of the business that we’re in. The positive aspect is hey, as a consumer it’s becoming easier and easier to do business, and it’s truly made it seamless and dare I say fun to move most of my shopping into the digital world. Do it with confidence both from our perspective, and I would argue from the merchants’ perspective it’s made it easier.
Vanita: Absolutely, and throughout the year people complain that phones have torn families apart or connected devices. Not the Thanksgiving day because now nobody rushes out you’re still together at night, you can shop at home. So the one-day of the year when phones and digital commerce brings the family together is Black Friday.
Armen: So I love what REI has done, have you seen this or not?
Armen: The CEOs for the third year in a row…
Vanita: Oh, they give the employees…
Armen: They shut down the day after Thanksgiving and I think that’s phenomenal. Let’s start a mini movement it’s a bit of prisoner’s dilemma of which retailers will follow along but a few … a few I think we’re putting a stake in the ground.
Vanita: It’s gonna make us better human beings because I think something dark comes out in people when they’re rushing across a big retailer for a discounted T.V. or a computer…
Armen: You’ve seen those videos, right?
Vanita: I’ve seen those videos.
Armen: Seen those videos about Wal-Mart; it’s kind of scary. I once actually went to the local shopping mall on Black Friday very late at night, just to experience it and it was a whole counterculture I just wasn’t prepared for. I mean, there were just throngs of people of all ages shopping. I think I got one thing after like, sort of like your experience, after many hours of just walking around and walked away with one item.
Vanita: It wasn’t worth it.
Armen: I think it wasn’t worth it to me. It was just so overwhelming and I didn’t sleep that night because I was up all night. Yeah, something to do once but thank you very much I’ll deal with my shopping in a faster way.
Vanita: I’m like a squirrel because you kind of realize if I go left I’m gonna miss out on the deals on the right side. So I think it’s about … fear of missing out. Make families close again or something like that. Maybe we should have our own…
Armen: Make families close again and stop the rain. There we go.
Vanita: Stop the rain, absolutely.
Armen: Well, this has been great Vanita. I appreciate your time. This was a very interesting discussion a lot on talk … holiday 2017 but other issues. Thanks for joining us on today’s edition of Digital Identity 360.
Vanita: Thank you. Thanks
Armen: Alright, take care.