David Fletcher
“What’s the ROI on this?”
This question gets asked every day in boardrooms across the world. And rightly so: Smart expenditures are those that eventually pay for themselves, either via revenue, increased productivity, or a reduction in costs.
But what’s the ROI on fraud protection?
Some enterprise-level merchants never even think to ask that question, viewing fraud as an inevitable part of doing business, and fraud protection as a rather dubious potential expense.
However, there are five significant reasons why a carefully chosen expert fraud protection solution can be a source of revenue for your business.
Reason 1: Fewer False Declines = Less Business Churn
Often, when merchants use fraud filters (or fraud prevention platforms based solely on algorithms), there’s an unintended consequence: false declines.
False declines take place when a legitimate transaction is declined because it triggered the fraud filter or algorithm. For example, a customer who always gets items shipped to her home may request that a large purchase of Christmas gifts be shipped to her son’s house – the address mismatch may be enough to trigger a decline.
Not only are they costly due to the lost sale amount, they can result in lifetime customer loss – and even worse: A ClearSale/Sapio Research survey recently revealed that 39% of consumers would permanently boycott a business that falsely declined their payment. And 28% of consumers would take their aggravation to social media, potentially causing a reputation-damaging viral post (i.e. a massive PR headache).
Fraud protection involves more than static filters and automatic declines. It’s the intelligence merchants need to stay ahead of fraudsters, and a good solution will ultimately pay for itself.
Reason 2: Reduced Chargeback Expenses For Ecommerce Businesses
Enterprise-level ecommerce merchants process an extremely large number of transactions, which makes them more susceptible to fraud and high chargeback rates.
This is especially important in high risk industries such as electronics, financial services, and travel where there is a higher incidence of online credit card fraud. The same is true for merchants processing transactions in multiple currencies and high individual sales amounts. Payment processors are more cautious about working with these merchants and may charge higher processing fees if adequate fraud protection measures are not in place.
A good fraud protection partner will understand the nuances of international markets, offer chargeback management strategies that save money, and prevent merchants from being flagged by their payment processors.
Reason 3: Reduced Enterprise Staffing Costs
An enterprise merchant may already have an internal team with fraud prevention listed among its many responsibilities, or they may have one or two fraud analysts with varying levels of expertise. But is the team adequately staffed to handle the amount of transactions coming in, now and in the future? Have they received training on the latest fraud trends and tactics?
Working with a fraud protection partner is a great way to supplement an existing team and ensure that fraud prevention practices are up to date.
Reason 4: An Increased Ability to Adapt Within Enterprise Markets
The push to “work smarter” means that companies are looking at ways to get more out of smaller teams. At the same time, enterprise merchants are pushing growth rates, resulting in more transactions. The increase in online ordering that comes with this growth requires more fraud prevention measures.
An outsourced team that can easily be scaled up and down as needed can significantly reduce labor costs.
Enterprise Merchant Example
Here is an example of how this would work: When merchants are experiencing an influx of new customers, they must be meticulous in detecting fraud. In this case, best practices recommend increasing manual review efforts. Small teams can’t handle having to hire, train and then retain staff who may not be needed consistently. But it can easily be done with an outsourced solution.
This precise scenario is taking place as we speak. The sudden ecommerce spikes due to COVID and resulting widespread lockdowns – especially, during the busiest shopping season of the year – are forcing enterprise merchants to process extremely high transaction volumes. The higher the volume of incoming transactions, the more overwhelmed an already busy fraud team will become, which leads to mistakes. And merchants – no matter how ample their resources – will struggle to recruit, hire, train, and deploy the number of analysts needed to handle this year’s influx.
Reason 5: Enterprise Business Experience
Staying on top of emerging fraud trends is a full-time job. Enterprise merchants are much better served by leaning on a stable of highly trained experts and analysts instead of expecting the one or two fraud analysts in their organization to shoulder the responsibility. At any point, those internal analysts could quit, retire, or become sick and a merchant’s fraud prevention efforts will be put on pause.
The type of expertise merchants should look for with fraud protection partners include:
Enterprise-level experience: Your solution provider should understand the unique needs of an enterprise merchant, from transaction volume to international currencies to fraud trends.
High approval rates: A good solution partner will have a reputation for high approval rates, manual review processes, and a low rate of false declines.
Real-world problem solving: Your solution partner should be able to suggest strategies and solutions for all of the issues your business has to address, regardless of your industry or type of business.
International business experience: Before a merchant sells in another country, their ecommerce team needs to understand the laws of that country pertaining to taxes, import duties and other regulations.
Cultural awareness: Your solution partner should have fraud analysts who have language fluency and an understand of the cultural nuances of other countries that impact shopping trends and fraudulent practices.
A trusted fraud protection partner is essential for enterprise merchants looking to expand into new markets and manage high levels of online transactions. Enterprise merchants can even justify the return on investment they take into account how fewer false declines, lower chargeback rates, and higher transaction volumes lead to more satisfied and loyal customers, and higher revenues.
