Fighting fraud to build eConfidence

By Elad Cohen, VP Data Science & Research at Riskified

It goes without saying that eCommerce has been a lifeline to retailers forced to close their doors during the pandemic, giving them a means of survival in an incredibly challenging year. While this shift to eCommerce happened out of necessity however, it’s widely predicted that many of the changes will be permanent.

While this boom in online sales has been welcome for many retailers, it hasn’t come without its challenges. As shoppers turned to the internet in their droves, so too did fraudsters – who flocked to try and take advantage of the increasing sales.

To better understand how fraud has impacted the eCommerce landscape over the last 18 months, we surveyed 4,000 consumers and 400 retailers across the US, UK, France, and Germany.

Our research shows that there has been an eye-opening rise in fraud attempts with more than three quarters (82 percent) of retailers in the UK seeing an increase since the pandemic began.

The research also unearthed an emerging confidence gap between retailers and consumers, with more than half (55 percent) of all retailers stating that they are confident in their ability to prevent eCommerce related fraud. However, only 34 percent of all consumers trust retailers’ ability to prevent fraud.

On top of this, more than a quarter (27 percent) of online shoppers in the UK said their concerns over online shopping are growing – and 51 percent believe that retailers will find it even harder to prevent fraud over the next year.

It’s clear that eCommerce presents a huge opportunity for retailers, but it’s only by building consumer trust and reducing the threat of fraud that they’ll be able to reap the rewards.

Too often, fraud prevention measures introduce customer friction. For example, two-factor authentication, which stops a fair number of fraudulent transactions, can also cause frustrated customers to abandon their shopping carts.

Our survey ranked two-factor authentication as the anti-fraud solution that is the most damaging to revenue for UK and French retailers, and the second most damaging for US and German retailers.

To effectively identify fraud without adding unnecessary friction, retailers must turn to Artificial Intelligence (AI) and Machine Learning (ML). AI solutions can look at hundreds of data points across billions of transactions to identify patterns. When properly trained, they spot unusual patterns or incongruous data points and recognise when it’s the work of a fraudster.

The best AI solutions will also recognise when good transactions are placed, even if the data might otherwise be associated with risk. They differentiate valid proxy usage, know who shoppers are across devices and spot legitimate patterns. Armed with that information, they can approve more orders for the retailer.

The boom in eCommerce isn’t going away any time soon and by embracing state of the art fraud prevention, retailers will be able to increase customer satisfaction and lifetime value. The opportunity for retailers is enormous, and the time to act is now.

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