February 22, 2019
February 20, 2019
Posted January 24, 2019
Coming off a record-shattering holiday selling season, the good times just keep rolling for retail eCommerce. But behind the scenes, there are signs that increased competition, evolving cybercriminal tactics, and sky-high customer expectations are threatening to crash the party.
Is digital identity the solution?
As it stands now, mobile and online merchants in the U.S. are poised to rake in an estimated $605.3 billion this year, up 15% from 2018. Yet for all the optimism, there may be storm clouds on the horizon.
The clouds this year: some business leaders are starting to use the dreaded “recession” word. While recession is a distant possibility, economic contraction now ranks as the top concern to global corporate leaders in 2019, according to a new survey of chief executives from the Conference Board. However, for U.S.-based CEOs, potential contraction is seriously eclipsed by angst over a much more certain issue: heightened cybercrime risk.
Talk about a brewing storm. On the one hand, merchants will reap immense opportunities afforded by reaching more consumers, especially in mobile channels. On the other hand, the immense competition will intensify for online merchants, with the lion’s share of the spoils going to those that can seamlessly, securely, and accurately identify the people they serve via digital channels. And that’s the rub – intense competition that frequently leads to cybersecurity shortcuts where the “securely” part of that equation is softened.
Why? Because as some merchants work to reduce friction to stay competitive, cybercriminal organizations armed with great social engineering skills and stolen identity credentials will continue to exploit reduced transaction scrutiny in order to defraud the hungry merchants. And the cost is staggering. This year’s price tag could top $19.4 billion in losses for U.S.-based online merchants! What’s more, the following 3 trends will serve to accelerate such dynamics in coming months.
Without a doubt, mobile is a must-have channel. But it’s also just the beginning. In 2019, look for further accelerated integration of mobile, online, and physical world commerce as merchants create an increasing number of consumer touchpoints by combining digital clicks with bricks, by way of real-world stores, logistics, and more.
Think voice this year. We are all much more conversant with Alexa, Siri, and Google Assistant and with the technology constantly improving, it’s no surpise that ComScore predicts that a new generation of digital voice assistants will account for 50% of all search queries made by voice by 2020. And digital-physical integrations like “Buy Online Pickup in Store” (BOPIS) continues to surge with 50% of U.S. consumers using BOPIS in the last 12 months—a whopping 43% increase over the previous two years, according to a survey from TotalRetail. To compete, a growing number of online merchants without physical locations are also turning to same-day delivery to facilitate instant gratification. That also goes for a wave of pop-up stores digital-native merchants plan to open this year. In fact, many malls are now reserving space for pop-ups for these online-only brands.
The bad news: cybercriminals have taken notice. According to ThreatMetrix data, fraudulent account login attempts are 10.2% over last year, while fraudulent account creations have soared a staggering 130%. Integrating online and offline retail will create its own new issues, since merchants continue to use separate, siloed systems for internal and online purchases—limiting their ability to verify customer identities in separate channels and to pinpoint fraudulent orders.
Biometrics are only a small part of the solution. But they are not enough. Cybercriminals can easily add a biometric to a hijacked retail or payment account, or to a new account they’ve opened using a synthetic identity.
By comparison, firms that use a multi-layered approach to cybersecurity that breaks down silos and includes modern, digital identity-based user verification and assessment technologies can experience total fraud costs that are 30% less than the sector average.
Instead of relying solely on static identity credentials, siloed systems, and biometrics; digital identity-based solutions analyze the complexities of each individual based on dynamic, real-time online and offline identity intelligence derived from thousands of trusted global businesses in numerous industries. As competition heats up, this kind of global cross-channel real-time intelligence will prove critical to success.
Today, more than half of all eCommerce transactions, mobile and otherwise, are cross-border in nature, reflecting increasing consumer appetite for goods and services beyond their domestic markets.
In fact, cross-border eCommerce is the fastest-growing sector in retail. Merchants that fail to expand into new regions will essentially be forfeiting tremendous growth potential. Yet, despite this new reality, some are hesitant to extend their reach beyond national borders.
Why? Because cross-border transactions are 69% more likely to be rejected than those made domestically. The issue: Consumer identity data such as national identity numbers or even standards around what constitutes a “home address” can vary significantly by region. And as stolen identity data winds its way around the globe, this kind of static super compromised identity data is effectively nearly irrelevant.
Cross-border transactions are also 15% more likely to entail device spoofing and 22% more likely to involve identity spoofing. Better yet, the people behind many of these transactions may not be people at all. Bot attacks against merchants are numbering more than 1.3 billion per quarter. That’s an incredible torrent of over 600K bot attacks per every hour of every day!
Merchants that refuse to cede global markets to more tech savvy competitors will need to seek out solutions that grant them access to globally-crowdsourced identity intelligence that doesn’t rely solely on static credentials, enabling them to accept international transactions with confidence—even from high-risk regions. Let’s face it, there are good customers everywhere!
By using this kind of intelligence, merchants are seeing significant increases in customer recognition rates in most regions. The advent of 3DS 2.0 will also help merchants cut down on friction while maintaining security.
According to a new Ecommerce Performance Indicators and Confidence (EPIC) survey of 276 eCommerce executives, enhancing the customer experience (CX) is the top priority for a quarter of merchants. The fear: even if online revenues are up now, you’ll ultimately fall behind if you don’t continuously focus on improving CX.
You can thank what’s being dubbed “The Amazon Effect” for that sentiment.
As Entrepreneur puts it, the Amazon Effect refers to the difficulty of competing against Amazon and its vast selection, fast shipping, free returns, low prices, “Prime” subscription service. Well, that and its nearly 50% market share.
In short, CX is make-or-break. Today, 87% of consumers think brands need to do more to provide a more seamless experience regardless of device, time, and location. For today’s customer, everything is about instant gratification—across web, mobile, pop-ups, and time zones. The ability to deliver a consistent, compelling, and fast experience at every touchpoint is key.
Some retail brands are deploying artificial intelligence (AI)-based tools to personalize recommendations to online customers. But while recommendations are cool, reducing cart abandonment is by far more central to enhanced CX. Today, almost 70% of online shoppers abandon their shopping carts. Worldwide, that translates into $4 trillion in lost revenue each year from people who are on your site or app, have selected products, are ready to buy, and somewhere between the confirmation screen and the transaction, give up on the transaction.
According to HBR, 50% of consumers will bail after just 10 seconds of added friction. So while nearly 20% may have some other reason, the majority of cart abandonment is prompted by the transaction itself. Think on that reality: $2 trillion in lost revenue over 9 short seconds! To reverse that trend, merchants must be able to accurately identify legitimate customers without intrusive authentication steps or added friction if they want to deliver the seamless online experience customers demand.
To achieve that without suffering massive fraud losses can be tricky. But here again, a digital identity-based approach will help. By continuously and passively authenticating users based on real-time dynamic identity, device, location and more, merchants are finding they can deliver an effortless, elegant transaction experience while protecting against cyberthieves, and do it without expensive new infrastructure or staffing. Who knows, digital identities may even start chipping away at the Amazon Effect.
None of this is easy. According to Forrester Research, 30% of businesses saw declines in customer experience performance in 2018, resulting in a net loss of a point of growth. In 2019, the firm predicts that 20% of US-based brands will fall behind on CX and be forced to cut prices to remain competitive, which only creates a race to the bottom.
The silver lining: those that do succeed in obliterating both fraud and friction—dousing cybercrime while exceeding customer expectations—will be well positioned to dominate that third driving factor this year: Competition. In all, it can translate into revenue growth of 4% to 8% above the average for their sector.
For retailers that embrace it, a digital identity-based approach to real-time user verification and assessment is the ticket to keeping those good times rolling all year. Nothing but green lights and blue skies!
To learn more about how digital identity-based approach to user authentication can help you thrive in 2019, please join me at our Digital Identity Meet-Up in San Jose.