Reduce Costs While Keeping Your E-commerce Store Protected

Glen Goldstein SVP
Blog Post09/28/2018

Solutions must learn and evolve to stay a step ahead of clever fraudsters

Online merchants are losing millions of revenue to fraud, reports Javelin Strategy & Research. This trend is projected to grow as criminals thwarted by EMV chip cards at physical stores shift their focus to online schemes.

Obvious costs like stolen merchandise and shipping fees are just a fraction of fraud’s impact on an online merchant’s bottom line. Chargebacks related to e-commerce fraud are expected to hit $31 billion by 2020 — an alarming increase from projections of less than $7 billion in 2016.

E-commerce sites also bear the burden of increased back-office expenses, including time-consuming manual reviews of suspicious orders. PYMNTS.com states that small merchants shell out an average of $378,000 a year for manual reviews — and that number reaches $825,000 at medium-sized companies.

Fraud’s hidden costs steal billions from e-commerce

Revenue also takes a hit from an array of hidden costs linked to fraud. A checkout page littered with cumbersome security measures exasperates shoppers and causes many to abandon their carts.

Forrester Research estimates that e-commerce companies lose $31 billion in revenue by watching nearly 70% of their customers walk away from loaded carts, with many customers citing cumbersome security checks as a reason for abandonment.

Lost customers and damage to a brand’s reputation are also huge threats. About 30% of transactions e-commerce sites decline as fraudulent are believed to be legitimate, causing $118 billion in lost sales. The lost revenue from false positives is roughly 17 times the losses from chargebacks due to actual fraud!

That number doesn’t include the additional lost revenue from insulted customers who are quick to take their future business elsewhere if their transactions are denied. Six out of 10 consumers say they’ll shop less or never return to a merchant who blocks their sale, Javelin reports.

Merchants are further damaged when angry customers whose accounts were compromised by fraudsters label the online site as untrustworthy — and potential customers who hear about the risk look for other places to shop.

The best offense against clever fraudsters is a clever defense

E-commerce sites are scrambling for a solution that reduces these costs while still delivering the effortless online experience customers demand. At the same time, fraud is evolving at lightning speed as clever criminals find increasingly sophisticated ways to slip past security measures.

The best offense is a defense that’s just as clever. Traditional anti-fraud solutions use rules-based systems that can detect simple, known patterns of fraud but are no match for the ever-changing tactics of today’s fraudsters.

Anti-fraud solutions must be able to spot irregularities and learn new patterns of fraud as they emerge to stay ahead of cybercrime. A solution like IDVisionSM from TransUnion that combines real-time searches with deep, contextual data and machine learning is key to stopping criminals from wreaking havoc on an e-commerce company’s bottom line.

Fraud costs online merchants in many ways — chargebacks, lost business and friction introduced at checkout that can drive good customers away. Anti-fraud solutions that learn and evolve can slash the losses merchants suffer by stopping hard-to-catch fraudsters at the earliest signs of malicious behavior.

Discover how to improve your customer experience while continually identifying and preventing new and emerging fraud threats. Fill out the form below and speak to one of our experts today.

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