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Understanding the e-commerce Payment Chain

Yes, fraud affects your bottom line


Yes, fraud affects your bottom line

After meeting with C- and D-level e-commerce executives and networking with them at trade shows for nearly a decade, I haven't met many who are focused on how fraud impacts their business.

Typically, their top issues are generating more site traffic, retaining site visitors, increasing conversions, creating seamless checkout processes, and increasing the lifetime value of their customers. If and when they talk about fraud, it's understood as a specific topic inside payments, a technical issue that doesn't require much of their bandwidth. Even though I respect their perspectives and I know that other challenges might be prioritized over fraud, I think there’s a huge underestimation of the role a fraud prevention strategy can play in an online business—including supporting those top-of-mind goals.

Fraud's impact on the bottom line

At its core, a company's main goals are winning customers and earning revenues that are greater than expenses. Fraud prevention has a role in both those processes, although the one that comes to mind first is cost reduction. Fraud from consumer-facing sources represented 2.14% of e-commerce revenues in the 2017 Lexis Nexis True Cost of Fraud survey, while Javelin Research put the cost of fraud losses, false positives, and fraud management at 7.6%. But because the average margins for retailers tend to hover around 4 to 8%, fraud may actually consume a huge proportion of a company’s profit. The exact cost of fraud will vary by sector and company, but the reality is that as e-commerce fraud continues to grow, so will the related costs to businesses.

An executive looking at these numbers might see them as more reason to focus on revenue generation and customer experience while people they trust handle the fraud cost-control issues. [Click here to read the full article].

ClearSale Fraud Protection Buyers Guide