The Retailer Autumn Edition 2021

THE RE TA I L ER

2 6

RETAIL FRAUD AND RISK TEAMS MOVE FROM DEFENCE TO OFFENCE

Ed Whitehead Managing Director, EMEA. Signifyd

I n the new era of ecommerce, risk teams are harnessing data and sophisticated tools to optimise customer experience and drive revenue It’stime for retail risk teams togoon theoffensive. Armedwith sophisticatedmachine-learning tools anddata-drivencustomer insights, risk teams can now do more than prevent fraud and protect the enterprise from harm: they can apply their decisioning skills and technologyacross theentire buying journey. Forward-thinking risk teams are now unlocking revenue throughfearlessecommerceandsecuring an all-important edge for their businesses over the competition. Fraud prevention has become risk intelligence. First, let’s look at the context: the tectonic shift towards ecommerceduring thepandemic.Much of thiswill be qualitativelyobvious tomany retail - ers, but we’ve pulled together some data to help quantify it. The big-picture shift is the sheer quantity of business nowcompleted online, which grewsub- stantiallyduring the pandemic and hasn’t abated significantlysince. Signifyddata shows that online revenue for merchants globally doubled in the first month of lockdown and that ecommerce spending was still up 76% year-on-year in mid- 2021. The pandemic has made shopping online the norm for consumers. Online exploration of brands and products is now intrinsic to today’s customer journey. The shopping shift has raised the profile of the online sideof retail enterprises. No longer is ecom- merce shielded from economic or operational downdrafts because its contribution is too small to worry about. It’s also increased online’s vul- nerability to fraud. Retail has changed, and so has fraud

Risk intelligence for maximum reward.

Over the course of the pandemic, fraudsters have ushered in a golden era of online fraud: it’s nowmore abundant, more automated andmore diversified in terms of techniques and targets. Compared to pre-pandemic levels, ecommerce fraud pressure (orders deemed to be fraudulent) was up nearly 350% by mid-2021.

Because of the shift to ecommerce, the buying behavioursofonlineconsumers and thechanging tactics of fraudsters can now have a more dra - matic impact on a retailer’s bottom line. Nearly 80 percent of consumers surveyed by Signifyd said they would be shopping differently now and in the future. It’s this change that turns fraudprevention intoan opportunity to become more than a cost centre in a retailer’s business. For example, it’s clear now that, more than ever, retailers need to be right when they decline an order. Two-thirds of consumers said they would stop shopping with a retailer that declined one of theirorders fornoapparent reason, andnearly53 percent of customers will give a retailer no more than one chance after a bad online experience beforeabandoning it. Consumers also increasingly want touse click-and-collect in all its forms.With a nearly unlimited choice of how and where to shop, the ball is squarely in the consumer’s court. Patience is thinnerthan it’severbeen, andshoppers expect a seamless shopping experience. Empowered by big data and advanced intelli- gence tools, fraud prevention has become risk intelligence. Forward-thinking retailers should use this added firepower to optimise revenues and produce a positive P&L – for example, by supporting convenient customer channels such as click-and-collect. Risk professionals can help to enhance customer experience and provide an edge over competitors. In the newecommerce era, risk intelligence can: • Foster a growth mindset by focusing on approving orders, not declining them. Declining a legitimate order is a worst-case scenario as it can lead to a customer abandoning a retailer for a competitor. Striving for seamless shop - ping and high approval rates is more beneficial and fosters a growth mindset.

‘‘

Consumers’ dramatic shift to ecommerce during the pandemic means that the online side of retail enterprises is no longer shielded from economic or operational downturns.”

Althoughretailershavebecomemoresophisticated at protecting theirenterprises frompayment fraud, fraud rings have changed many of their tactics and become focused further down the payment chain. Less common forms of attack — such as the use of synthetic identities, return fraud, and fraudulent fulfilment disputes — have flourished, andothershavediminished.Unauthorisedreselling, policy abuse and return fraud are also on the up. Here’s a few bits of research which illustrates the point: • Over 50% of merchants surveyed by FIS global reported more synthetic identity, • Bot attacks increased 146% during 2020. • Click-and-collect is 210% higher than pre-pandemic. • Even consumer abuse, including false item-not-received claims, were up over 100% in the first half of 2021. card-not-present, chargeback, and account takeover fraud in 2020.