In the new era of ecommerce, risk teams are harnessing data and sophisticated tools to optimise customer experience and drive revenue

It’s time for retail risk teams to go on the offensive. Armed with sophisticated machine-learning tools and data-driven customer insights, risk teams can now do more than prevent fraud and protect the enterprise from harm: they can apply their decisioning skills and technology across the entire buying journey.

Forward-thinking risk teams are now unlocking revenue through fearless ecommerce and securing an all-important edge for their businesses over the competition. Fraud prevention has become risk intelligence.

Retail has changed, and so has fraud 

First, let’s look at the context: the tectonic shift towards ecommerce during the pandemic. Much of this will be qualitatively obvious to many retailers, but we’ve pulled together some data to help quantify it. 

The big-picture shift is the sheer quantity of business now completed online, which grew substantially during the pandemic and hasn’t abated significantly since. Signifyd data shows that online revenue for merchants globally doubled in the first month of lockdown and that ecommerce spending was still up 76% year-on-year in mid-2021. The pandemic has made shopping online the norm for consumers. Online exploration of brands and products is now intrinsic to today’s customer journey. 

The shopping shift has raised the profile of the online side of retail enterprises. No longer is ecommerce shielded from economic or operational downdrafts because its contribution is too small to worry about. It’s also increased online’s vulnerability to fraud.  

Over the course of the pandemic, fraudsters have ushered in a golden era of online fraud: it’s now more abundant, more automated and more diversified in terms of techniques and targets. Compared to pre-pandemic levels, ecommerce fraud pressure (orders deemed to be fraudulent) was up nearly 350% by mid-2021. 

Although retailers have become more sophisticated at protecting their enterprises from payment fraud, fraud rings have changed many of their tactics and become focused further down the payment chain. Less common forms of attack — such as the use of synthetic identities, return fraud, and fraudulent fulfilment disputes — have flourished, and others have diminished. Unauthorised reselling, policy abuse and return fraud are also on the up. 

Here’s a few bits of research which illustrates the point: 

• Over 50% of merchants surveyed by FIS global reported more synthetic identity, card-not-present, chargeback, and account takeover fraud in 2020. 
• Bot attacks increased 146% during 2020. 

• Click-and-collect is 210% higher than pre-pandemic. 
• Even consumer abuse, including false item-not-received claims, were up over 100% in the first half of 2021. 

Risk intelligence for maximum reward 

Because of the shift to ecommerce, the buying behaviours of online consumers and the changing tactics of fraudsters can now have a more dramatic impact on a retailer’s bottom line. Nearly 80 percent of consumers surveyed by Signifyd said they would be shopping differently now and in the future.  

It’s this change that turns fraud prevention into an opportunity to become more than a cost centre in a retailer’s business. 

For example, it’s clear now that, more than ever, retailers need to be right when they decline an order. Two-thirds of consumers said they would stop shopping with a retailer that declined one of their orders for no apparent reason, and nearly 53 percent of customers will give a retailer no more than one chance after a bad online experience before abandoning it. Consumers also increasingly want to use click-and-collect in all its forms. With a nearly unlimited choice of how and where to shop, the ball is squarely in the consumer’s court. Patience is thinner than it’s ever been, and shoppers expect a seamless shopping experience. 

Empowered by big data and advanced intelligence tools, fraud prevention has become risk intelligence. Forward-thinking retailers should use this added firepower to optimise revenues and produce a positive P&L – for example, by supporting convenient customer channels such as click-and-collect. Risk professionals can help to enhance customer experience and provide an edge over competitors.

In the new ecommerce era, risk intelligence can: 

• Foster a growth mindset by focusing on approving orders, not declining them. Declining a legitimate order is a worst-case scenario as it can lead to a customer abandoning a retailer for a competitor. Striving for seamless shopping and high approval rates is more beneficial and fosters a growth mindset.  
• Speed up decision-making. With ecommerce, speed is of the essence. Risk teams need to use data and intelligent tools to enhance the accuracy and speed of their decision-making. Determining if an order should be shipped or not should take milliseconds. 
• Enable strategic objectives. The data and tools at a risk team’s disposal in 2021 should be used for maximum impact across the business, including optimising revenue and enabling strategic objectives. Risk teams are no longer line items.

There was a time when risk professionals were on the defensive. Their job involved avoiding chargebacks and defending declined orders from finance teams who accused them of sacrificing speed for caution.  

The move to risk intelligence requires a shift in thinking. Businesses can now deploy their risk team’s resources and intelligence to build payment processes which are optimised for efficiency, creativity, and revenue.  

With ecommerce competition fierce, the biggest risk to a retailer might be to not embrace this new opportunity.