E-Commerce Merchants Can Get Card Transactions Guaranteed

Skye Spear in Forbes

This post summarizes the article by Tom Groenfeldt in Forbes.

Within three years merchants will no longer be liable for credit card fraud online, said Skye Spear, vice president of partnerships at Signifyd.  Already firms like Signifyd, Forter and Riskified use fast, smart technology like real-time machine learning to review credit card orders coming into e-commerce operations, decide which orders are safe and guarantee those orders.  If the order turns out to be fraud, the companies will reimburse the merchant. Signifyd charges for providing a guarantee range from about 50 to 100 basis points, or 1 percent of an order. In the future, Spear said, credit card companies could just tack that onto what they charge for their card, or retailers could simply contract directly with the guarantee providers.

“We’re seeing tremendous penetration in SMB mostly through partners,” Spear added. “We’re being embedded into Magento, [a large e-commerce platform] and you will see some more announcements about our being embedded in other e-commerce platforms.”

The company works through a dedicated sales team and also through e-commerce platforms to reach the large number of SMBs which are looking for an effective fraud prevention tool.

Some of the largest internet retailers are using Signifyd, he added, and more are on the way.

“We want to be the BASF of the e-payment fraud world,” Spear explained, referring to the giant chemical company’s slogan, “We don’t make a lot of the products you buy. We make a lot of the products you buy better …” The company has partnered with American Express, Magento and, recently Salesforce.

Earlier this month Signifyd announced that it has joined the Salesforce Partner Program in support of Salesforce Commerce Cloud to help Commerce Cloud customers achieve protection from fraud as they grow their business across the United States and internationally.

“The world’s leading brands leverage Salesforce Commerce Cloud to deliver secure, seamless, personalized experiences for their customers across every channel,” said Signifyd’s CEO, Raj Ramanand in the company’s press release. “We take the same approach to fraud, eliminating it in-context, real-time and with machine learning built upon decades of domain expertise. Our financial guarantee ensures Commerce Cloud merchants have a fully predictable cost for fraud that declines over time while their order acceptance rates and margins increase.”

As companies move into e-commerce, they quickly learn they have to manage fraud, which often leads them to build teams to monitor orders and look for problems. Some fraud attempts are obvious, like billing addresses that don’t match shipping addresses or an order that lacks the right CVD code. Spear said companies begin to pay attention to fraud when they reach 20 to 50 employees and fraud becomes costly and time-consuming.

Firms face several problems in combating fraud, starting with training the surveillance team to spot it. If this is done in-house, the team has to expand during holidays, but that means trying to train newcomers very quickly. A second problem is that people reject a lot of orders that are good, or would have been good if the company had fulfilled them. Manual review also takes time, which is a problem for firms that stress fast service and shipping within hours of the order’s arrival, and for firms that operate 24 hours a day and want to send out confirmation when an order is being processed.

“We go through and take first look with machine based checking and some human intelligence,” said Spear. “Humans are good at gut feel. We will decline a certain percentage and put them back to the organization which may take a look with their team  and say they know this person and while their purchase pattern looks suspicious, he’s a VIP who is on a plane every three days.”

Signifyd can be used as part of a layered solution at merchants which are already using fraud scoring software and want to use Signifyd to check orders the scoring system turned down. Merchants can send their high risk order to Signifyd.

“Anything we can approve is found money for the merchant, and anything we can’t approve has failed two fraud checks,” said Spear. “We only charge for orders we accept, and we don’t have long-term contracts. So if I decided to be super conservative and turn down a lot of orders, the merchant is going to fire me. Our average merchant revenue goes up 3% when they deploy us, and that is at mature organizations. At less mature firms, or firms trying to expand into new geographies, they can see revenue go up 8% to 15%.

Once e-commerce companies learn about companies that will review orders and take on the liability, they are enthusiastic.

“Scoring is dead,” said Spear. With the liability shift, firms can budget in their fraud costs — 50 to 100 basis points, perhaps less for the largest merchants — and outsource their fraud monitoring entirely, or just maintain a small team in-house.

Tom Groenfeldt writes about finance and technology. In 2015 he was named one of the 25 top global finserv influencers. In addition to Forbes, Groenfeldt writes for International Finance Magazine, Banking Technology and Mondo Visione, all based in London.