What’s the world’s third largest mobile commerce market? According to new research by global market research company Ipsos, it’s Nigeria, where 72% of online consumers shop on a smartphone, compared to a 47% world average.
If you weren’t expecting that answer, you’re not alone. Many companies underestimate the Nigerian market. In fact, Nigeria has such a bad reputation when it comes to online transactions, thanks to all of those “Nigerian prince” scams, that many online businesses simply blacklist orders from the country altogether.
While it’s understandable that companies are willing to go to great lengths to avoid the significant losses represented by successful fraud, this new survey throws into sharp relief one simple fact: Blacklisting no longer makes sense.
Why Blacklisting Breaks the Balance
Preventing loss is only one part of what fraud prevention ought to do. The right balance must always be found between loss avoidance and behavior that helps to grow sales and create an excellent customer experience.
Blacklisting is a disaster from this perspective – it simply stops all sales from a particular group. That means the business is turning away the revenues those good sales represent, and insulting the customers who tried to make the purchases. To return to our Nigerian example, while it might be true that there are a lot of Nigerian “princes” around, it should be obvious that the overwhelming majority of that 72% are good customers trying to make genuine purchases. That’s a lot of money to turn away.
Moreover, since customers who have been mistakenly rejected from a website often never return (one study found that 32% of such consumers simply never go back) in many cases the merchant has lost future revenue as well as present profit. They’ve lost a customer as well as a sale.
Pushing customers who’ve been blacklisted through manual review isn’t good news either. No consumer likes to experience delay or uncertainty – what if their order hasn’t gone through? – and such behavior often causes cancellations. And calling them up to confirm their identity is time-consuming and can cause offense. One retailer, who is now with Forter and so relieved of the need for manual reviews and extra identity confirmation, noted that when they used to do that, asking for proof of identity, “they thought we were the fraudsters!”
New Technology Means New Opportunities
Traditional fraud prevention models did rely on rules and scores to judge transactions and protect a site from online fraud, and risk-averse policies translated into rules that blacklisted entire regions or even countries. But, as Forrester puts it, “legacy fraud management mechanisms fail in today’s economy.”
New technology has superseded the rules-based model. Machine learning combined with human creativity, analysis and experience provides the basis for an entirely new way of approaching fraud prevention – one that allows the system to take each order on its own merits rather than relying on blanket rules that fail to reflect the complexity and nuance of the modern global shopper.
This means that the unique characteristics of different countries can be taken into account, and customers analyzed from a perspective which remains sensitive to those differences. For instance, Nigerian fraudsters behave differently to genuine Nigerian shoppers, and fraud prevention systems ought to be able to distinguish between the two.
Moreover, the combination of machine learning and human research can ensure that the system is always up to date. Rules were usually changed on, at most, a monthly basis. That’s no longer enough to keep up with fast-changing fraudsters, who always have a new trick up their sleeve, or good customers who live and adapt to a fast-changing world. It’s now possible to have real-time decisions for every transaction, based on an understanding of what people are doing today, not last month or last year.
And decisions can be real-time, every time. The delays that used to be an inevitable aspect of fraud prevention no longer apply. Consumers can experience the instant confirmations that they have come to expect in a world where 1-click ordering has become the new norm.
The Bottom Line
In practical terms, an end to blacklisting can mean the ability to enter into whole new markets. One retailer working with Forter was able to increase their international sales 35%. They had always known that they were turning away good orders, but until starting to work with Forter they hadn’t realized the extent to which that was costing them. They now even advertise proactively in the countries where they are most popular, with excellent results.
It’s also better for both their brand and customer experience. A buyer who is instantly approved by a system that understands his story and identity is going to be a lot happier than a buyer who is mistakenly declined as fraudulent, or made to wait hours or days for confirmation, or contacted with searching questions about his true identity.
Many merchants remain unaware of the huge strides that have recently taken place in the fraud prevention space. New technology has made a new approach possible – one which puts good customers, and their needs and expectations, first. It’s time that merchants start using it to do just that. It’s time for fraud prevention to be customer-centered.
