The release of the Gartner Market Guide for Online Fraud Detection comes at an important time for merchants and retailers that are focusing beyond fraud alone and looking for ways to address false declines, policy abuse and customer experience.
If you’re evaluating ways to optimize eCommerce customer experience and profitability, here are 3 key takeaways from the Gartner Market Guide for Online Fraud Detection:
Market Graduation: Evolution from Fraud Detection to Customer Acquisition
Most eCommerce leaders look at fraud detection software as a basic need. But, as the report indicates, ‘enlightened merchants’ see the opportunity to increase ROI by reducing false positives for genuine customers and enhancing the overall shopping experience.
The changing shopping patterns created by COVID-19 resulted in a large number of new, legitimate shoppers being declined due to false alerts on fraud. Forter’s analysis of the market shows that new users on any eCommerce site were 5-7 times more likely to be falsely declined than returning customers, primarily because of the lack of data on the new user – something we call new user, missed opportunity (or NUMO for short). This can cost merchants up to 75x more in lost revenue than actual online fraud. Forter’s use of a Persona Graph to identify similarities in new and known consumers significantly reduces false declines, so merchants can drive more immediate revenue and customer lifetime value.
Policy Abuse: The Next Fraud Trend
Covid-19 changed how a lot of retailers and merchants worked with customers as they eased restrictions on returns, or created new policies like Buy Online, Pickup in Store (BOPIS) to accommodate new shopping habits. The report highlights policy abuse as a major differentiator when evaluating fraud prevention platforms.
However, fraud and abuse are very different and they require tailored tactics and technologies. Fraud is well defined—black-and-white across merchants—and typically involves a fraudster ‘hiding’ their identity. Abuse has more gray area and often originates with consumers who are not hiding their identity; the merchant has to assess their specific thresholds and policies. Since fraud is perpetrated by individuals who are not your customers, you need a Persona Graph to recognize those fraudsters. Whereas most merchants have the dataset to recognize serial abusers; they need better tools to link the accounts of serial abusers and take targeted action. Forter is one of the vendors that understands this distinction, rather than treating fraud and abuse as the same problem with the same approach.
Banks, Payments and the Ecosystem of Trust
Fraud detection can no longer be looked at in a silo or as a point solution, but should be viewed as a strategic commerce enabler. This will happen at the merchant, platform and payment levels.
According to Gartner’s Strategic Planning Assumptions, “By 2024, the top five issuing banks in the U.S. and Europe will be ingesting data directly from merchant-side OFD vendors to improve authorization rates.”
That’s why Forter introduced Trusted Authorization earlier this year—allowing enterprises to connect directly with issuing banks to reduce false declines. In our work with customers, this offering has increased authorization rates by 1-3%; demonstrating that driving efficiencies at this point of intersection adds value for all parties.
At Forter, we believe that enterprises should focus on fraud as a means to address false declines, grow revenue and improve genuine customer experience. Click here to access the Gartner Market Guide for Online Fraud Detection.
Gartner Market Guide for Online Fraud Detection
Published 12 July 2021 – By Analyst(s): Akif Khan, Jonathan Care
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