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Friction vs fraud: Building a smooth checkout experience



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The signs of the looming holiday season are everywhere in retail: The hiring scramble. The stress testing of critical systems. The seasonal merchandising strategies. And, of course, the polishing up of the customer experience — a crucial task during a season when retailers are likely to see a bump in first-time visitors.

And while it’s a familiar drill, there is something arguably different about this year’s customer experience efforts. The anecdotal evidence is strong that more retailers are broadening the way they think about “customer experience” to include more of the interactions they have with customers after the buy button.

For instance, the release by eMarketer of a compilation of research highlights the intensified focus on the role high-quality fraud detection in ecommerce and protection plays in creating a memorable customer experience.

The eMarketer work, “Balancing Fraud Protection and Frictionless Checkout,” relies on research by ACI Worldwide and Internet Retailer to illustrate that merchants are torn when it comes to the balance between reducing friction at checkout and protecting themselves against fraud.

Internet Retailer and ACI found that 20 percent of retailers surveyed said preventing fraud took precedence over smooth checkout. Only 6 percent said friction-free checkout was more important than preventing fraud. But 26 percent said that while they considered fraud protection for merchants as the bigger concern, they also placed friction-free checkout as a top priority.

Balancing friction-free and fraud prevention can be agonizing

You have to feel for those in the 26 percent, wanting to do the right thing for customers, but worried about being taken advantage of. The thing is, they’re on the right track. Given advances in enterprise fraud protection, it no longer has to be an either/or struggle. The emergence of guaranteed fraud protection, a machine-learning-driven model that comes with a guarantee against fraud losses on approved orders, has changed the way forward-looking retailers are managing fraud.

Dara Meath, the vice president of information technology for the Camuto Group talked at IRCE this summer about the way technology had changed — and about how those changes mean retailers can now have it both ways.

“The best way that companies can do that is to get all of the right technology in place for themselves,” said Meath, whose company owns, licenses or partners with Tory Burch, the Jessica Simpson Collection, Lucky Brand Jeans and Vince Camuto.

It seems inevitable that more and more retailers will begin to embrace the notion that the answer has to be both — they need a friction-free buyer experience and a robust fraud detection and protection strategy. Mary Meeker, who for years at Kleiner Perkins presented an annual, closely watched recap of the most import internet trends, this year laid out the requirements for an ecommerce technology stack.

Among the eight key pillars she listed was Merchant Fraud Prevention. In fact, she used Signifyd as the example. It seems unlikely that her choice of a guaranteed fraud provider was an accident, because guaranteed fraud prevention solves the very conundrum the eMarketer work exposed.

In another indication of the growing prominence of fraud protection as a customer-experience differentiator, ecommerce platform Magento recently published a how-to guide for retailers that want to improve their online checkout experience. Among the half dozen recommendations in “6 Key Components of a Better Checkout Experience,” was a chapter stressing the importance of both improving the customer experience and protecting the business from fraud.

Poor fraud-protection performance hurts the customer experience

The chapter, which was produced with Signifyd’s help, pointed out that fraud systems that require cumbersome manual reviews or that decline legitimate orders for fear of fraud, significantly damage a retailer’s relationship with consumers. In fact, friction-filled fraud management can damage the relationship enough that the consumer calls it quits.

“There is really no worse customer experience than essentially telling a legitimate customer that their order isn’t coming,” Signifyd Senior Product Manager Gayathri Somanath told Magento for the e-book.

Finding a way to excel at both customer experience and fraud protection is important every day for retailers. But there are times and circumstances when being able to do both is all the more important.

For instance, eMarketer pointed out that retailers struggle with cross-border ecommerce experiences — shipping orders into new and unfamiliar markets with new and unfamiliar fraud threats. In fact, eMarketer notes that cross-border ecommerce digital traffic has a 22 percent higher likelihood of identity spoofing and a 15 percent higher likelihood of device spoofing, compared to domestic orders.

The result? eMarketer reports that cross-border transactions are 69 percent more likely to be declined for fear of fraud than are domestic orders. That’s great if those orders are in fact fraudulent. But the truth is, a portion of them will not be fraudulent, meaning the merchant misses out on making a sale and instead creates a frustrated consumer who is unlikely to visit the merchant’s site again.

Holiday shopping season presents its own fraud challenges

And of course, the holiday shopping season presents its own distinctive fraud challenges. Order volumes surge. The number of unfamiliar site visitors often increases as gift-buyers shop on a site for the first time. Order values may increase. Shipping and delivery addresses are likely to be mismatched more often than during the rest of the year.

But the holiday period is exactly the wrong time for online retailers to become more restrictive when it comes to sorting legitimate orders from fraudulent ones — for all the customer experience reasons we’ve discussed.

No doubt the world of ecommerce will continue to evolve and accelerate, which will present retailers with challenges. But retailers should take solace in the fact that the tools to help them provide their customers with better experiences are evolving at an accelerating rate, too.

Photo by iStock

Contact Mike Cassidy at [email protected]; follow him on Twitter at @mikecassidy.

 

Mike Cassidy

Mike Cassidy

Mike is the head of storytelling at Signifyd. A former journalist and a retail geek, he covers ecommerce and the way technology is transforming digital commerce. Contact him at [email protected].