Rick Sunzeri
Many enterprise ecommerce merchants have been riding high on an increase in online sales over the past year. The flush of new ecommerce shoppers who naturally trust more recognizable brands has accelerated revenues to record levels.
At the same time, this huge uptick comes with a jump in online fraud. Enterprise ecommerce merchants are especially susceptible, since fraudsters have banked on being able to blend in with the massive onslaught of new customers.
Meanwhile, enterprise ecommerce merchants are finding themselves held to higher expectations than ever by consumers, who expect a seamless, hiccup-free shopping experience.
With the need for more robust fraud prevention measures and the need to provide a seamless and delightful CX – which best practices will allow enterprise ecommerce retailers to have it all?
“The pandemic's impact on retail hasn’t just increased online activity – it’s also dramatically changed consumer behavior. To ensure they don't lose valuable customers, retailers will need to balance fraud prevention and CX.”
Rafael Lourenco, EVP and partner at ClearSale.
In this blog, we’ll explore the seven best practices we share with our enterprise ecommerce clients to help them balance fraud prevention with a great customer experience.
7 Essential Best Practices for Enterprise Ecommerce Merchants
1. Make customer experience a top priority
2. Embrace digital transformation
3. Choose your payment processor wisely
4. Recognize the lifetime value of each customer
5. Know how fraud impacts your customer-facing teams
6. Understand 0% fraud is not realistic
7. Consider fraud prevention as a perfect candidate for outsourcing
Make Customer Experience a Top Priority
In a recent ClearSale consumer behavior study, we uncovered a promising statistic that confirms the power of ecommerce: Among those surveyed, 33% of consumers age 65 and older said they plan to increase their online spending. Brands need to be ready with a seamless shopping experience on every platform.
The key word here is seamless. Customers are busy and have plenty of options, so they won’t hesitate to look elsewhere if your site is slow, has poor search and filtering functionality, or requires them to jump through multiple hoops (or worse, reenter information) during the checkout process.
The easier and more intuitive it is to navigate your ecommerce site, your returns process and your customer service, the more likely customers are to keep coming back.
These are the new table stakes. Any enterprise ecommerce merchant who doesn’t clear this bar will find themselves bleeding revenue.
But what about the next level? How can you create a customer experience that isn’t just satisfactory, but delightful? A wise approach is to use digital technologies to increase customer communication and improve service levels.
- Let customers interact with products: It can be difficult to make purchasing decisions with just an image and description. Use technology that allows customers to virtually “try on” products before purchasing.
- Add dimension to images: Use 3D product imaging for zooming in and rotating products so customers can examine them from all angles.
- Use chatbots and other concierge services: 90% of customers want answers to their customer service question fast – within 10 minutes, in fact. Chatbots use FAQ responses to provide immediate answers to common customer questions that can facilitate sales.
Lastly, enterprise ecommerce merchants absolutely need to lean into omnichannel strategies that connect brick-and-mortar stores, mobile apps and social commerce to create a seamless shopping experience for customers.
Embrace Digital Transformation
A successful digital transformation begins with technology. A growing number of applications are available to improve efficiency at all levels, addressing inventory management, customer service, marketing and distribution, operations, supply chains and product development. A true digital transformation removes the barriers between functions, eliminating bottlenecks and errors so that business units work together as a whole.
Adopt Headless Commerce
Enterprise ecommerce merchants have no shortage of technology projects to keep their IT department busy. Why use a traditional e-commerce platform that requires time-consuming and inflexible updates when there are more dynamic solutions available?
Headless commerce solutions make the user experience more fluid and developer time more productive by linking a single backend with multiple API frontends.
Consider a PWA
Progressive web apps (PWAs) offer the best of the app and website worlds and allow for push notifications, access to a camera, microphone, GPS, voice commands and other app-like features. Plus, they run faster, so the user experiences a fully optimized ecommerce site.
Leverage Artificial Intelligence (AI)
AI facilitates everything from analytical insights on buying patterns across customer groups to individual customer actions. For an enterprise ecommerce merchant, this data shortcuts the time to “get to know” your customers and allows for more personal service and messaging. AI can also help predict how customers will react to marketing and other tactics intended to increase brand loyalty and generate more sales.
Automate Repeatable Tasks
Using automation improves efficiency across the organization, from inventory management to customer service to supply chain. By reducing the repetitive tasks that can be digitized and handled systematically, automation improves workflow, reduces errors and increases buyer satisfaction.
Choose Your Payment Processor Wisely
Where small online businesses may work with multiple payment processors, enterprise ecommerce merchants tend to go with a one payment processor that rewards high sales volumes with price points per transaction. By trusting a single solution to handle point-of-sale systems, interchange rates and currency conversion, enterprise merchants only need to contact a single company if something goes wrong.
The key is to select the right payment processor that will ensure compliance and allow for growth.
Compliance
Payment processor compliance is critical because it addresses PCI compliance and eliminates your liability. Make sure your processor stores customer credentials and sensitive information in an encrypted vault and offers tokenization – a technology that masks credit card information when it’s being stored or transmitted.
Reporting
Your payment processor should have standard analytics and reporting functionality that can be imported into your corporate tools to track KPIs and measure the health of your ecommerce operations.
Geography
In today’s multinational market, where cross-border ecommerce is becoming the norm, enterprise merchants must have a payment processor that facilitates your expansion to international markets, with an understanding of that market.
At ClearSale we understand the nuances and requirements that may need to be considered in various regions globally. For example, we perform 85% of the online payment market risk evaluation in Latin America because we know the countries, cultures, languages, shipping methods, method of payments to do cross border business. You want your payment processor to offer the same regional qualifications.
Omnichannel
Enterprise ecommerce merchants should expect their customers to shop from multiple devices. In turn, your payment processor much allow for seamless transactions on any devices, from PC to gaming system to mobile phone.
Recognize the Lifetime Value of Each Customer
Consumers know fraud is an issue and they count on merchants – especially recognizable brands – to protect them from fraud.
But they will walk away without hesitation if one of those merchants declines their purchase.
Not only does it put you in a tough spot, it puts revenue at risk.
Fewer False Declines = Less Business Churn
When determining the return on investment for fraud prevention, it’s vital to consider the costs of false declines, especially when you consider that 90% of declined transactions are valid.
When every $1 in false declines costs merchants $13, the value of each customer becomes even more quantifiable. Losing that many clients from false declines translates to a lot of lost revenue. And the marketing investment needed to replace those customers is even more costly.
A former ClearSale client declined more order attempts using the competitor solution and lost considerable sales. When they came back to the ClearSale solution, we minimized their total costs with a 70% reduction in declines – resulting in an increase of almost 3% in sales.
The lesson? Focus on your key metrics when analyzing the ROI of your fraud prevention strategy. You may be losing more than you save if your solution isn’t sophisticated enough to prevent false declines.
Be Wary of Blacklists
Another way that enterprise ecommerce merchants can lose sight of their customers’ value is by assuming that fraud prevention blacklists will help them fight fraud. These blacklists are what many merchants use to automatically decline transactions that contain one or more data elements from a previously fraudulent transaction, such as name, address, phone number, email, IP address, etc.
The problem is that the data isn’t always specific to a particular customer – IP addresses aren’t static and general physical addresses may block apartment units of valid customers.
Even more common is the situation where the customer whose name is on the list is the actual victim of fraud. So, in addition to them having their personal information stolen and used without their permission, they’re also being blocked from making valid purchases – not a great customer experience by any measure.
Know How Fraud Impacts Your Customer-Facing Teams
For enterprise merchants, fraud is lurking around every corner with account takeovers (ATOs), chargeback fraud, card not present (CNP), and discount code abuse being among the four most popular methods.
A new Juniper Research study projected that ecommerce fraud losses will surpass $20 billion in 2021, thanks to the pandemic-related onslaught of new online shoppers. The country most at risk is China, which is expected to account for over $12 billion in ecommerce fraud losses by 2025.
Fraudsters have mastered the art of recognizing which companies have poor fraud mitigation processes. Much like the velociraptors in Jurassic Park, they continue to “test the fences for weaknesses.”
Enterprise Ecommerce Fraud Strains Operational Teams
What enterprise merchants don’t always think about is the strain fraud (and in-house fraud mitigation) puts on their organizational resources.
Customer support teams are inundated with refund requests and stolen account inquiries. Every data breach adds an unexpected, high-stress workload to your IT department. Your finance department spends countless hours fighting and (hopefully) winning chargebacks.
Enterprise Ecommerce Fraud Damages Your Reputation
Then there’s the impact on brand reputation, stock value, and customer loyalty if your company’s vulnerability to fraud becomes a known entity. The myth that large companies are better able to deal with fraud is just that – a myth. The snowball effect of impacts can overwhelm an enterprise merchant and derail it from achieving its goals.
Understand 0% Fraud Is Not Realistic
“There’s no such thing as 0% fraud for enterprise merchants. Their focus should be on reducing fraud as low as possible and managing the expectations of their executive team.”
Rafael Lourenco, EVP and partner at ClearSale
To prevent fraud, enterprise ecommerce merchants cannot rely on just one approach.
At ClearSale, we talk to our enterprise ecommerce clients about realistic expectations and educate them on the thresholds that indicate they are approaching the “danger zone.” These thresholds vary by country and industry.
In Mexico, where fraud is rampant and there is less institutional gatekeeping, a chargeback higher than 0.5% and/or an approval rating lower than 90% would be a sign that something is amiss. On the other hand, enterprise ecommerce merchants in the U.S. should be concerned when their chargeback rate becomes higher than 0.3% and/or their approval rate is lower than 98%.
Keep in mind, these numbers represent when an enterprise ecommerce merchant should take action. If they wait until they reach the industry standard of 1%, it will be too late. That’s when credit card companies and other processors begin to pile on penalty fees and place merchants in monitoring programs.
Specific Fraud Prevention Tactics for Enterprise Merchants
Speaking of taking action, here are two of the most common fraud tactics levied against enterprise ecommerce merchants – and how to fight back:
Account Takeover (ATO)
Every time there is a customer data breach, enterprise ecommerce merchants should brace themselves for the inevitable. Fraudsters use that stolen customer data to sign in and take over accounts with the intention of committing fraud.
Enterprise merchants need to use a combination of behavioral biometrics and analytics to systematically track customer behavior patterns and detect changes that could be a sign of ATO fraud. Data authentication and manual reviews are also employed to validate transactions and/or spot fraud.
Gift Card Fraud
Gift card fraud has increased considerably with the pandemic. We tracked an increase of 30% in fraudulent online gift card purchase attempts between March and October 2020. For enterprise merchants, gift cards are more than just currency – they are often the product that customers go online to purchase, so reducing this type of fraud is critical.
We recommend tracking gift card data and monitoring fraudulent behavior, such as instantaneous activation – most people don’t activate and use their cards immediately upon purchase. Enterprise merchants should also be on the lookout for resale, trading, and counterfeiting schemes.
Consider Fraud Prevention as a Perfect Candidate for Outsourcing
To prevent fraud, enterprise ecommerce merchants cannot rely on just one approach.
They need an arsenal of technologies, tools, and practices based on experience across markets and trends.
And it all needs to be scalable, intuitive and easy to implement quickly.
Simple, right?
Enterprise Ecommerce Fraud Prevention Requires Experience
Fighting ecommerce fraud at the enterprise level requires industry knowledge, decades of experience, and a macro view of fraud trends, both nationally and globally.
Unfortunately, many executives mistake the technical resources and budget they see on paper as proof that they can create a full fraud prevention system in-house. What they don’t consider are the other enterprise-level projects that will have to take a back seat … not to mention the fraud losses that occur while a solution is being developed.
The time in-house developers spend trying to earn a de facto Ph.D. in fraud prevention to create some semblance of a solution only gives fraudsters more time, more opportunity, and a clear message that your organization is ripe for attack.
Today’s enterprise ecommerce merchant has to juggle customer service and fraud protection to ensure brand loyalty and to achieve revenue targets. This balance is best served by partnering with a solution provider that understands the industry, the latest fraud trends, and how consumer behavior is shaping ecommerce now and into the future. To discuss your enterprise ecommerce business, ClearSale is here to help.
