Given the ongoing financial squeeze on many households, tolerance, convenience and security are now three critical issues of acute importance for retailers and e-commerce sites, claims Nick Mothershaw, director of identity and fraud at Experian
The dilemma retailers face is epitomised by three separate findings made by Experian. On the one hand online shoppers will tolerate up to four minutes of checks before abandoning their transaction. But despite e-commerce’s relative convenience, it is estimated more than £1bn worth of online transactions are abandoned as customers get frustrated at delays.
It also emerged one in five of these abandoned transactions were not taken elsewhere as individuals cancelled their shopping attempt altogether – equating to around £214m worth of net lost revenue.
Research conducted for Experian by the International Fraud Prevention Research Centre also highlighted how nearly half (44%) of UK shoppers abandoned at least one online shopping transaction within the past year after getting frustrated with the length and complexity of older forms of identity verification.
At the same time, online retailers are obliged to balance the relative risk of shoppers’ evident impatience against validation levels, as it is clear consumers need to be more security-savvy after it emerged global fraud networks traded more than 12 million pieces of personal information, during the first four months of this year.
The illegally-traded personal information included millions of log-in and password combinations. It put millions of consumers’ online accounts at risk, as the average Briton will have 26 separate accounts but use no more than five different passwords.
There’s clearly a huge benefit to e-commerce sites using less efficient identity checks to upgrade to newer tools, which enable improvements in security levels and faster, less onerous checks.
Not only will operators be protecting their cash-flow and online sales, they are also helping to protect their customers from fraud, which will underpin their reputations among shoppers and peers alike.
Considering the value of abandoned transactions, using up-to-date technology that enables extremely robust identity checks, which are completed almost instantly, makes the investment worth every penny.
Older forms of online identity verification are typically complex, standalone systems drawing on single sources of information to corroborate identity information. They are often unable to validate as many individuals electronically as modern services. As a result, genuine customers may be forced to call a contact centre, submit physical documents through the post or visit the store or branch to confirm identity.
Alternatively, the organisation might choose to accept a lower level of proof, and risk higher levels of fraud, in order to minimise customer inconvenience.
But it’s not all doom and gloom for retailers. It is estimated total fraud losses on UK cards fell to around £340m last year, representing an overall seven per cent year-on-year reduction.
The fall is due to the growing prevalence and adoption by retailers to online protection initiatives, successful campaigns to raise customer awareness, improved sharing of fraud data and intelligence within the industry, with law enforcement and other sectors. At the same time, there have also been drives to safeguard chip and PIN equipment, greater deployment by both retailers and banks in using fraud detection tools, the continued upgrading of the chips on UK cards and increased roll-out of chip and PIN abroad.
But it’s also a matter of vigilance and the cost-effective use of technology by all sides, because we also know that fraudsters are fast, adaptable and inventive – if an opportunity is spotted.