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With fewer security features in use, online retailers have less protection against disputed purchases.
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With the holiday shopping season in full swing, online businesses are faced with the challenge of maintaining a fine line between fraud prevention measures and offering a seamless customer experience.
To find out about what businesses can do, Digital Journal spoke with Experian’s Chris Ryan, Senior Fraud Solutions Consultant, Decision Analytics, North America.
Ryan explains how businesses can increase online shopping revenue with advanced identity assurance this holiday season.
Digital Journal: The holiday buying season is in full swing. What key challenges are retailers facing?
Chris Ryan: The holiday shopping surge raises the stakes for retailers in every aspect of their business. To make the most of the opportunities, retailers need to make the best possible decision to approve or refuse every attempted purchase. These decisions are not as simple as they appear, especially for online purchases where card-based security features such as the EMV chip are not available to protect against fraud risks.
With fewer security features in use, online retailers have less protection against disputed purchases. The reasoning is that the reduced security creates higher risks so the merchant has to assume more risk to sell in that environment. Maximizing good sales and controlling risks are the key challenges the industry faces. With this in mind, retailers need to leverage a solution that prevents fraud and reduces risk while providing a seamless experience for customers.
DJ: How can online retailers increase sales without compromising their fraud defence?
Ryan: Online retailers need data and technology that raise confidence in a shopper’s identity. Currently, the data merchants receive to approve transactions simply is not enough. This leads directly to high review rates and lost sales. Experian Link fills this gap by enabling online merchants to augment their real-time decisions with data that links customer identity to the credit card being presented for payment to help verify the legitimacy of a transaction. Using Experian Link, retailers can link names, addresses and other identity markers to the customer’s credit card. The additional data enables better decisions, increased sales, decreased costs, a better buyer experience, and better fraud detection.
DJ: Can you talk about the issue of ‘false declines’ and how it impacts revenue and the customer experience?
Ryan: False declines occur when a good customer is suspected of fraud and prevented from completing a purchase. This can result in retailers losing revenue. A recent report found that the average false declines rate is 1.16 percent, and if you consider that there was over $960 billion in U.S. online sales in 2021, the potential for loss is significant.
Additionally, when good customers are rejected, there are impacts to future sales with that customer. Experian’s Global Insights Report found that 4 in 10 U.S. businesses lost more than 10 percent of their customers in 2021 due to suboptimal digital experiences. With a higher rate of false declines, retailers risk losing customer loyalty and business. Retailers can cut down on the number of false declines by using Experian Link’s data and technology to validate a customer’s identity so they can confidently authorize good transactions.
DJ: What type of results have online retailers seen as a result of Experian Link?
Ryan: Experian Link’s main goal is to help retailers make better decisions with transactions that are rejected or reviewed for fraud risk by augmenting their current decisioning with additional data and technology. The results to date from Experian Link are exciting. Our clients are seeing online instant approvals increase from approximately 70 percent to over 80 percent. This increase comes directly from automating the approval of good transactions that today are routed through secondary review processes. It represents a direct reduction of costs and improved customer experiences. We are also seeing the reviewed and rejected customer population drop from approximately 5 percent to 3 percent, resulting in less false declines and increasing sales by as much as 2 percent.
DJ: Looking ahead to 2023 and beyond, what do you see as the new or ongoing challenges to operate secure ecommerce?
Ryan: The digital landscape has changed so much within the last few years, and it is only going to continue to evolve with digital transactions being the pillar of the consumer shopping experience. Fraudsters will continue to be opportunistic and relentlessly look for their next venture. In order to grow sales in a smart way, retailers will need to leverage innovative solutions that incorporate data and technology to address current and future fraud challenges.
Dr. Tim Sandle is Digital Journal’s Editor-at-Large for science news. Tim specializes in science, technology, environmental, and health journalism. He is additionally a practising microbiologist; and an author. He is also interested in history, politics and current affairs.
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