May 21, 2016
By Steve Platt, Executive Vice President, Fraud and Identity, Experian
In the last few years we have seen a gradual shift in customer expectations when it comes to their online shopping experience. Historically, customers didn’t mind an interruption in their shopping if it allowed for increased security measures and stronger protection. They appreciated the concern. Today’s consumer, however, demands a smooth, enjoyable and safe experience without any hassle. They expect the places where they do business to safeguard them in ways that don’t waste their time, question their intentions or force them to prove who they are each and every time. Instead of appreciating the extra steps as they had in the past, today’s online shoppers feel frustrated with the extreme overload of more passwords, authentication, identity confirmations, etc. Consumers expect to be recognized and welcomed in every channel available to them. They are right to expect this. And when it doesn’t happen, it’s more than inconvenient. It erodes loyalty and damages trust.
Retailers are left with the challenge of balancing the customer experience with financial protection. And, this isn’t a one-and-done concept. In some cases, we’ve found consumers are willing to forgo certain levels of protection for a hassle-free shopping experience, yet there is still an expectation that strong anti-fraud protection measures are in place—preferably ones that go unnoticed. That’s the consumer perspective. The fraudsters themselves are not predictable, and the speed at which they evolve their tactics adds even more complication. They take advantage of any opportunity while retailers work to keep up, protect shoppers and grow their business. To avoid losing customers and revenue, retailers need to find a way to sort the good from the bad and understand who their customers really are without impacting the customer experience.
Fortunately, there are actions retailers can take now to minimize fraud, maximize customer satisfaction and confidence and accelerate business growth. What are the best ways to balance customer protection with customer experience? [hide for=”!logged”]
Avoid knee-jerk reactions
Retailers are under attack and the natural reaction is to tighten controls by putting more locks on the door. In the short term this often stops the fraud, but it also holds up or delays more genuine orders than necessary. Knee-jerk reactions result in more hurdles in an already complex process, and often lead to a poor customer experience and lost revenue. Over time, those locks grow old and no longer stop the fraudsters who continue to innovate at a rapid pace, leaving retailers with more burden and without a way to effectively detect fraud.
The key for retailers when considering prevention measures is to take a more strategic approach—one that doesn’t negatively impact good customers. Understanding the fraud attack rate—a strong indicator for how much fraud is attacking the business—helps retailers from over-correcting a fraud problem and needlessly rejecting legitimate transactions.
Embrace a layered approach
In order to evolve beyond a system that stalls honest customers, retailers needs to think holistically, shifting their emphasis from stopping the bad guys to letting more good customers through. A multi-layered approach includes a combination of products and strategies working together to verify identities and assess risk. The layers need to be designed and implemented in a way that provides the appropriate level of risk mitigation and confidence you need for every transaction. Retailers need to develop a tailored prevention strategy unique to every customer and every order, taking into account what is being purchased, who is purchasing it, where it is being sent, how it compares to previous orders, etc. This allows retailers to tailor fraud mitigation strategies to the inherent risk of the transaction versus a one-size fits all approach, leading to the appropriate level of confidence for every purchase transaction. As a result, retailers achieve the ultimate goal of removing friction from the customer experience without sacrificing protection.
Use data and analytics
Today’s digital world provides more data sources than ever before—mobile devices, social media, Website, sensors, enterprise systems, third parties and more. The good news is that most retailers are collecting data to better understand their customers, but, unfortunately, very few have a really thorough, methodical enterprise view and application of data and analytics. The purpose of applying data and analytics is to get a full and complete view of consumers and their activities, allowing much more accurate insight into what the right products are for those consumers and also raising flags on potential fraud. However, as the devices proliferate and consumers have more and more interactions across the entire digital landscape, it’s become increasingly harder to get that view. Retailers need to start working with intelligent partners to not only get a better understanding of their customers but to apply that insight to better identify and verify legitimate transactions.
There is no silver bullet when it comes to fraud protection. Retailers have built over time a portfolio of protection mechanisms, both for insight into customer experience and fraud protection, resulting in a patchwork of individual solutions that only solve a piece of the problem. This plethora of solutions has created a lot of friction in the customer shopping experience. Retailers have to be able to coordinate the integrated insight and response that comes from all the individual components in a way that minimizes customer interferences and protects the company as a whole. Either or is no longer acceptable. It is imperative to provide a positive customer experience while also providing the appropriate level of fraud prevention and detection. By integrating some of the tips mentioned, retailers can keep their customers safe AND happy when they shop online.
Steve Platt is executive vice president for fraud and identity at Experian, a global information services company, providing data and analytical tools to clients around the world. Experian helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. [/hide]