As ecommerce grows into a bigger part of the retail pie and fraud rings become increasingly sophisticated, it has become clearer by the day that no one approach to fraud protection is the right approach for every merchant.
That’s one reason Signifyd has evolved, improved and expanded its approach to protecting merchants while optimizing their revenue for nearly a decade. The most recent example is our launch of Authorization Rate Optimization. The enterprise-grade solution maximizes revenue from online transactions by harnessing machine learning and data from Signifyd’s vast Commerce Network to weed out fraudulent orders before they are presented to payment gateways for authorization.
Authorization Rate Optimization makes retailers’ lives better by ensuring they don’t pay authorization fees on orders that never materialize. The solution also improves their standing with payment gateways and banks by ensuring that the orders presented for authorization represent high-quality, or clean, traffic. And it gives merchants full visibility into their authorization rates and the ways in which Authorization Rate Optimization is improving those rates.
- Enterprise retailers can avoid costly authorization fees by detecting fraud at the pre-authorization stage.
- Pre-authorization stage friendly fraud prevention is now more vital because of the growth in bot-attack powered fraud.
- Sending clean traffic down the payment lanes improves retailers’ standing with payment processors and banks, meaning retailers ship more orders.
Ecommerce enterprises have always operated in one of the most competitive and fast-moving industries on the planet. The pace of change has only accelerated and the effort required to keep consumers as life-long fans has only become more difficult. Add to those competitive pressures, the unprecedented disruption brought forward by the COVID-19 pandemic and the need to preserve and increase margin at every turn becomes all the more important.
Protecting retail margins has never been more important
“We’re moving to an earlier stage of the checkout, now applying Signifyd’s machine learning expertise and technology to increase authorization rates for some of the world’s largest enterprise retailers,” Signifyd Co-Founder Michael Liberty said when we announced the launch earlier this month. “Our Authorization Rate Optimization tool is an extension of our Commerce Protection Platform and is particularly critical at a time when retail margins are under intense pressure. It provides customers the best authorization rates in the industry while giving them full visibility into the entire order flow from cart conversion to final fulfillment.”
Signifyd’s Authorization Rate Optimization expertly identifies payments that would typically be destined for decline before they are ever sent for authorization. Intelligent routing of those transactions ensures that Signifyd merchants have the highest authorization rates in the industry, save on payment processing costs, satisfy requests for strong customer authentication (SCA) in Europe, and maximize conversion at every point in the payment journey.
Enterprise retailers have been wrestling with the costs of transaction authorizations for years. While publicly available research has estimated that 15% of attempted ecommerce transactions are typically declined up front by payment gateways and banks, Signifyd has worked with retailers who were seeing as many as 40% of their orders declined at the authorization stage.
In fact, we saw one large retailer increase its authorization rate by 20 to 33 percentage points after deploying Signifyd’s Authorization Rate Optimization.
High pre-authorization decline rates are an increasing reality as fraud rings become more sophisticated and more likely to turn to fraud attacks carried out by automated bots. The attacks are costly, despite the relatively low fee — think 10 cents for an enterprise retailer, though fees vary widely. The sheer magnitude of an automated attack — thousands or hundreds of thousands of bad orders in quick succession — can be financially devastating. After all, 10 dimes is a dollar and 100,000 dimes is $10,000. And that’s just one, moderate attack.
Worse still, there is no return on that spending. That’s $10,000 in early order-flow fees that lead to nothing — no order, no sale, no happy customer, no lifetime value.
Beyond the upfront cost, missing fraudulent orders before authorization causes bigger problems when a fraudster actually slips through the authorization process. In that case, the merchant is going to lose the value of the product and associated costs to fulfilling the fraudulent order.
Signifyd’s Commerce Network helps open merchants’ transaction pipeline
And then comes the chargeback, which brings both financial and reputational damage with it. The series of entities involved with ecommerce payments penalize merchants that appear to be unable to control fraud. When gateways, issuing banks and acquiring banks see retailers with high fraud rates, they constrict the number of orders they will process from that merchant.
In the worst case, payment gateways can entirely shut down a merchant’s order processing to avoid risk.
Signifyd leverages its Commerce Network, an ecosystem of thousands of merchants, processing billions of dollars of transactions a year, to sift fraudulent from legitimate orders before they are submitted for authorization. Ensuring that merchants are sending clean traffic to the players in the payments system encourages them to open up the transaction pipeline to process the increased number of good orders, which leads to a higher authorization rate and more revenue for the merchant.
Ensuring that merchants send clean traffic through the payments system encourages banks and processors to process the increased number of good orders, which leads to a higher authorization rate and more revenue for the merchant.
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And with Authorization Rate Optimization reporting, merchants always have full visibility into their authorization rates, a key metric that has been difficult to track. Understanding how transactions filter through to completed authorizations, shipped goods, cancellations and returns is simple.
Signifyd’s new solution gives retailers what they need to take advantage of ecommerce’s growing market share while holding innovative fraud rings at bay. By preventing payment failures before they even happen, and by stripping away operational inefficiencies, merchants save on costly authorization fees. By increasing conversion rates and sending dramatically cleaner traffic to authorizing banks, merchants can squeeze more revenue out of every transaction and dramatically increase their top line.
All of which makes the future for today’s online retailers look very bright.
Photo by Getty
Want to talk about lowering your authorization fees and increasing your conversions? Reach out.