November 21, 2017
Fraud Prevention: Three “Singles Day” Lessons for Online Retailers
Posted November 10, 2017
Memo to online retailers: We’re all “Singles” now.
With Singles Day 2017 set to shatter last year’s record of $17.8 billion in online sales, the dynamics fueling its success offer key lessons for every retailer looking to achieve revenue growth while preventing online fraud at a global scale.
China’s Singles Day, of course, is the offbeat opposite of Valentine’s Day, held on November 11 each year (and is, in fact, often referred to as “11-11”). During the past decade, Alibaba CEO Jack Ma and others have succeeded in turning what was once a quaint celebration for unmarried singles into the world’s biggest 24-hour shopping spree, reaching far beyond China’s borders.
In Ma’s mind, the future belongs to what he calls the “new retail,” driven by core competencies in commerce, cloud, logistics, and yes, brick-and-mortar — along with more than a little glitz, glam and global ambitions.
It looks to be paying off. This year’s Singles Day could top $20 billion in sales — just for Alibaba, let alone Baidu, Tencent and others. For perspective, that’s not just more than all the other retailers on Earth collectively earned from Thanksgiving through Cyber Monday in 2016. It’s six times more. It’s also more than all of Brazil’s eCommerce sales for a full year.
Indeed, Alibaba’s role in this eCommerce bonanza can teach other retailers a lot about profitably and securely scaling digital operations to attain sustainable business growth in the $3.4 trillion global digital economy. Here’s a look at three of the major takeaways for retailers around the world.
Mobile commerce dominates Singles Day, accounting for 82 percent of total sales volume last year.
That’s no surprise, given China’s position as the world’s largest mobile payments market, with transactions expected to top $6.3 trillion by 2020. For its part, Alibaba’s own Alipay mobile payments unit comes in handy, as does its 100 million daily users around the world.
The mobile trend is universal: Our own data shows the proportion of eCommerce transactions made by mobile devices has grown 200 percent since 2015 — and is up 55 percent so far this year. According to Adobe Analytics, 54 percent of all visits to retail sites will come from smartphones or tablets, as will 34 percent of all purchases. That could exceed $34 billion or more in mobile transactions between now and the end of the year.
Still, for many online retailers, taking full advantage of the mobile shopping revolution can be challenging. With a growing number of consumers opening and managing accounts on their mobile devices, more of them are saving credit card information to retailer sites and apps, making for a lucrative target for cybercriminals wielding stolen identity credentials harvested on the dark web. Beyond the loss from stolen merchandise, chargeback fraud is already up 41 percent year over year.
The problem is that traditional user authentication systems can’t tell the difference between legitimate customers and criminals if they’re both using valid credentials.
That’s where a technology breakthrough from ThreatMetrix comes in. Called ThreatMetrix ID, this unique identifier marries anonymized offline and online data to passively assign a unique identifier to 1.4 billion consumers within the ThreatMetrix Digital Identity Network.
By leveraging real-time and historical device and behavioral data, ThreatMetrix ID provides this anonymized identifier at the point of each transaction, along with a dynamic confidence score to confirm the user’s identity and the risk associated with a transaction, based on more than 750 dynamic data elements that can’t be faked or stolen. Fraudsters are stopped at the front door, even if they’re using legitimate credentials.
For retailers, that means they can quickly begin conducting safe, secure mobile transactions with confidence, even without the kind of massive mobile and online payment infrastructure Alibaba had to build on its own.
Go Global or Stay Home
Like a super-charged Amazon, Alibaba’s success is fueled by its proprietary data on 440 million active users in 435 countries.
Not only does that make for massive marketing power, but it can also be used to authenticate users and analyze transactions to spot fraud at a scale most retailers can’t match on their own. Yet that doesn’t mean other retailers can’t catch up. And, they will have to, if they want to stay relevant in today’s digital economy.
As it stands, cross-border eCommerce is the fastest-growing sector in retail. Through 2022, it’s expected to grow 17 percent, compared to just 12 percent for eCommerce in general. But it comes with fraud rates up to 2.5 times higher than selling domestically. Thanks to a lack of reliable identity data in many regions, many retailers just can’t get a read on the identity of legitimate consumers, let alone fraudsters.
ThreatMetrix can change all that. Thanks to anonymized, crowdsourced identity data from the ThreatMetrix Digital Identity Network, retailers instantly have the ability to understand who they’re transacting with, anywhere around the world – even if it’s a first-time user on their site or app.
With this kind of instant, global authentication capabilities, retailers are able to expand into new markets by accepting more cross-border transactions, even if they’re from regions considered high risk.
Keep it Smooth and Seamless
In today’s hyper-competitive marketplace, consumers everywhere expect frictionless, fraud-free user experiences. For retailers aiming to steal a page from Alibaba’s playbook, this is especially true when scaling for big events, whether it’s a one-day sale or entire holiday seasons. On-demand throttling of real-time authentication and fraud prevention is essential to avoid business disruptions.
That’s why we developed ThreatMetrix ID as a scalable, cloud-based solution. With a global data center footprint, ThreatMetrix easily accommodates demand spikes, and helps businesses deliver an effortless, elegant transaction experience. Cybercriminals are forced to target less-protected prey.
And it all happens in real time, without the need for businesses to beef up infrastructure or staffing. In an era when every online retailer needs to have a Singles Day-scale mentality when it comes to delighting customers and preventing online fraud, these kinds of capabilities can be enormously important.
In fact, they can make all the difference in the world.
To learn more about ThreatMetrix ID and how it can help your business achieve seamless digital business globally, check out this exclusive white paper on ThreatMetrix ID.