E-commerce Fraud Protection Without the Friction

Signifyd is a Business Reporter client.

Online fraud is on the rise and it’s hurting e-commerce. 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 and now: In 2010, online sales as a percentage of total retail sales in the U.K. were in the region of 6%–7%; by the beginning of 2020, they had grown to 20%. But then came the pandemic: According to the U.K. Office for National Statistics, by January 2021, they had soared to nearly 37% of total retail sales.

The infrastructure for the 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.

But not everything was prepared for. As e-commerce sales began to shoot up in 2020, so did fraudulent online activity. Indeed, fraud grew at a faster rate than even e-commerce growth, with criminals using the increase in online activity to hide fraudulent orders or transactions, often in territories outside of the U.K. where legislation around such behavior is looser.

The right balance

Brands already reeling from the economic chaos caused by the pandemic found themselves facing mounting fraud problems. Implicit for 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 accustomed to that friction in Europe, where such checks have been established for some time, in the U.S. market they are less so. Applying the anti-fraud tech used in Europe to the U.S. market might see a company lose a big portion—perhaps up to 25%—of their customer base.

A one-size-fits-all approach to anti-fraud also doesn't work because, for example, checks in place in Europe might not be strong enough to mitigate risk in regions where organized crime is more prevalent. Furthermore, where shopping is done predominantly via social media platforms, rather than dedicated retail websites, different mechanisms for screening and approving orders are 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 this problem that is causing endless headaches for brands. It places customer experience first, and in doing so, it plays a key role in helping brands to retain their engagement.

For more information, please click here.

This article originally appeared on Business Reporter. Image credit: iStock id1170135656