Rajesh Ramanand, Co-Founder and CEO, Signifyd
Online fraud is on the rise, and it’s hurting e-commerce. But one company has developed innovative, frictionless tools to tackle the problem
The shift to online shopping was already well underway before the Covid-19 pandemic struck in early 2020. Compare figures from a decade ago to now: in 2010, online sales as a percentage of total retail sales in the UK were in the region of 6 to 7 per cent. By the beginning of 2020, they had grown to 20 per cent. But then came the pandemic. According to the Office for National Statistics, by January 2021, they had soared to nearly 37 per cent.
The infrastructure for an expanding e-commerce market was largely in place by the time Covid-19 forced physical stores to close and shoppers to go online. Brands had invested considerably in developing an online presence, and innovative fintech companies had competed with one another to make the digital payment process much easier. In effect, the stage was already set for e-commerce to really take off.
Hot Topic/BoxLunch is a Signifyd client
But not everything was coming together. As e-commerce sales began to shoot up last year, so too did the fraudulent online activity, by one-third compared to the previous year. Indeed, fraud grew at a faster rate than even e-commerce growth had, with people using the mass of online activity to hide fraudulent orders or transactions, often in territories outside of the UK where legislation around such behaviour is looser.
The right balance
Brands already reeling from the economic chaos caused by the pandemic found themselves facing deeper problems. Implicit in the issue facing online companies dealing with the risk of fraud is finding the correct balance between security and customer experience. Barriers against fraudulent activity often come in the form of greater checks on customer activity across the buying process, especially at checkout.
This creates friction for the customer and may prevent their continued use of a brand or service. While online shoppers are more used to that friction in Europe, where such checks have been established for some time, in the US market they are less so. The upshot is that applying the anti-fraud tech used in Europe to a US market would see a company lose a big portion – perhaps up to 25 per cent – of their customer base.
Au Vodka is a Signifyd client
Arguments for a one-size-fits-all anti-fraud approach are similarly weak in other territories. In Latin America, for instance, organised crime is more prevalent, and the checks in place in Europe might not be strong enough to mitigate the risk of attack. Furthermore, where shopping is done predominantly via social media platforms, rather than dedicated retail websites, different mechanisms for screening and approving orders will be needed.
The upshot is that although e-commerce may in some respects be in a far healthier place than it was even 18 months ago, new dangers lurk. Moreover, the burdensome legacy technology currently in place to prevent fraud could deter one-time loyal customers from future purchases. Technology and services such as that developed by Signifyd, which provide rigorous anti-fraud protections while avoiding friction points for customers, are the answer to a problem that is causing endless headaches for brands. It places the customer experience first, and in doing so, it plays a key role in helping brands to retain their engagement.
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