March 15, 2019
3 Rules for eCommerce Success in 2019
Posted February 22, 2019
eCommerce fraud is never a fun topic, and for merchants looking to maximize investments in mobile and online channels, revenue generation and new customer acquisition have sometimes been overriding priorities. Fraud prevention is fine, the thinking sometimes goes, as long as it doesn’t add any friction that might get in the way of a sale.
But a funny thing happened on the way to 2019. In its annual predictions report, Forrester Research finds that over the past year, customer experience (CX)-based initiatives meant to address escalating customer demands, as well as opportunities to capitalize on technological innovation to create new revenue streams and enter new markets, may have collided with “find-it-and-fix-it” urgencies to address immediate problems.
For some organizations, this may have ended up curtailing longer-term efforts to streamline and enhance CX in ways that that could make all the difference in an increasingly unforgiving marketplace—and pushed concerns about fraud and cybersecurity even further down the to-do list.
But here’s the thing. As it turns out, a focus on fighting fraud and outgunning your competition through a fast, friendly CX may in fact be one and the same thing—if it’s done right. In fact, it’s the pragmatic steps that can deliver the greatest (and quickest) ROI for merchants. With that in mind, here are three key rules for the year ahead:
#1 Omnichannel Is No Longer Optional
According to a new Shopgate survey, 67% of retailers say omnichannel is their top priority this year, citing a focus on the customer, cost efficiencies, revenue, and competitive advantage. As Retail Customer Experience puts it, “Being an ‘omnipresent’ retailer is no longer a ‘trend’ in 2019…It is now table stakes to remain competitive.” For 50% of survey respondents, a mobile shopping app is job #1 this year.
But winning at omnichannel isn’t just about how many channels you use. It’s about how well you’re using them. Here’s what I mean: Let’s say I order a product by voice using a smart speaker. An hour later, I use the merchant’s mobile app to switch delivery addresses so my order isn’t left on my front door. A few hours later, I pick up the product at a local delivery kiosk. When I try the product, I decide it’s not quite right, and I want to return it at the merchant’s local retail store—without having to stand in line.
Enabling all of these touchpoints to flow seamlessly, without having to re-authenticate the user many times, is the real power of omnichannel retail. It’s also a promise that’s enabled by the same digital identity-based user verification and assessment solutions that leading retailers have been implementing in recent years. Through real-time, passive authentication, retail businesses that have deployed these solutions report they’re able to reduce fraudulent sales and chargebacks even while reducing customer friction.
What’s more, the most innovative of these solutions are SaaS-based, requiring no additional infrastructure or increased head-counts for fraud or security teams.
#2 A Fractured Experience is a Dangerous One
These kinds of capabilities can be incredibly helpful. As it stands now, an endless supply of stolen credit card numbers and other compromised identity information is expected to lead to more than $130 billion in losses from CNP fraud through 2023. What’s more, chargebacks cost merchants as much as $19.4 billion annually, according to Javelin Research.
And those are just the direct losses. Today, merchants pay up to $3.20 in total costs for every $1 in fraud, according to 2018 True Cost of Fraud Study for the Retail Sector. And with fraud growing 35% in just the last year, pursuing faster transactions without simultaneously fighting fraud could be a fool’s errand.
But this ability to recognize both legitimate customers and fraudsters is also only as good as your most vulnerable point. Thanks to all that stolen identity data, many merchants can’t always recognize returning customers—much less treat them in a consistent manner at every touchpoint within even a single channel, let alone multiple.
The problem: Account creation, logins, and payments teams typically work separately, with siloed data. As many businesses are discovering, this creates a fractured experience for legitimate customers and makes it very difficult to deliver a seamless CX at every step of the customer journey.
It also opens up huge opportunities for cyberthieves who will use credentials and credit-card testing, synthetic identities and other approaches to identify and exploit individual touchpoints and channels that lack this kind of digital identity-based verification. The rise of self-learning bots could be especially problematic this year, with their ability to automate the process of finding and exploiting vulnerabilities.
For many retailers, the ability to instantly recognize legitimate users and fraudsters even if it’s their first time using a site or app could prove especially compelling. Look for retailers with this particular need to seek out solutions with access to globally shared identity and threat intelligence about trusted identities and known fraudsters drawn from thousands of trusted businesses in every industry, worldwide.
#3 Believe in the Power of Consortium
Amid growing adoption of digital identity-based user verification and assessment solutions, one of the most exciting developments is the rise of industry consortiums. At their most essential, these consortiums are groups of businesses within the same industry that work together to add an additional layer of fully anonymized identity intelligence to their trust decisioning during transactions.
For example: Let’s say a legitimate customer’s credit card number (or identity) has been compromised and used to fraudulently book travel, or to place wagers in online gambling sites (or even to take out a loan). Now let’s say that legitimate customer goes to place a purchase on a merchant’s site, perhaps not even realizing her credit card (or identity) has been stolen. That merchant uses real-time passive authentication drawing on global, shared intelligence, so it knows the credit card has recently been used fraudulently—perhaps even earlier today.
The merchant’s policy rules may immediately reject the credit card when the customer attempts to make a purchase. Or, if it’s part of a consortium of retailers, the merchant may set rules to determine if the credit card has been used fraudulently to make retail purchases. If not, the merchant can decide to let the transaction proceed, or to use a quick step-up to confirm the card is being used by its legitimate owner.
This has a number of effects. For one, step-ups can be reserved for that 1% to 2% of all questionable transactions that truly benefit from such out-of-band authentication, enabling the merchant to streamline the vast majority of transactions.
Even more importantly, each new merchant that joins the consortium is able to instantly benefit from the shared intelligence and best-practice business policies by the existing group of merchants—turbocharging efforts to reduce commerce fraud and enhance CX at the flip of a switch. And the consortium’s network grows smarter with each new transaction and each new merchant participant. Alternatively, a consortium is only as strong as its weakest link so enabling real-time visibility is essential across all customer touchpoints and channels.
Security is the New CX
With nimble, tech-centric competitors on the rise, customers will take flight for the ease, speed and convenience they desire. In fact, it’s estimated that $1.6 trillion will change hands in the next year as consumers permanently defect from one brand to another due to poor digital customer experiences.
Digital identity may be more than just a critical component to avoiding that fate. In Forrester’s view, savvy companies will maximize the value of security from a strategic and operational standpoint this year. Given how an identity-centric approach to cybersecurity can also help enhance CX, we’re not just talking about protecting against losses from ecommerce fraud anymore. We’re talking about a pragmatic way to generate new business growth.
And the payoff could be huge. According to Bain & Company, businesses that excel in customer experience grow revenues 4 to 8 percent above the average for their market by attracting new customers, earning stronger customer loyalty and boosting lifetime values. Which means it could be a very smart game plan in 2019—and beyond.
See how a digital identity-based approach to user verification & assessment can help reduce eCommerce fraud and enhance CX—download this special solution brief on Smart Authentication from ThreatMetrix