How Fraud Prevention Impacts Customer Experience
By Sarah Beldo /
27 Jun 2016
Think about the last time you had a less-than-impressive customer experience (CX) online. What made it disappointing? Something broken on the website? Maybe there was a confusing returns policy? Your item didn’t arrive in the timeframe promised? Or perhaps the annoyance happened at checkout, when your card got declined?If you’re like most people, that single poor experience colored your opinion of the company you were dealing with. Maybe you haven’t even bothered to return to that online shop – it just doesn’t seem worth the hassle.
For retailers, creating a positive customer experience isn’t just a “nice to have” – it’s a must. Retail leaders like Amazon, Apple, and Target have raised the bar for what customers expect when they make a purchase. When some online retailers offer multiple payment options, same-day and free shipping, free returns, and exceptional customer service, it makes the buying process easy – and even fun. Even more importantly, once customers are exposed to the possibility of these benefits, they expect them from every store they shop in.
An exceptional CX can translate into significant bottom-line impact. In its study on the relationship between customer experience and customer loyalty, Forrester found that customers who had a positive experience were more likely to come back for another purchase, more likely to recommend the business to a friend and less likely to switch to a competitor.
- Keeping customers happy pays off. It is 50% easier—and less costly—to sell to existing customers than to new ones. In fact, the probability of selling to an existing customer is 60-70%, while the chance of selling to a new prospect is only 5-20%.
- Customer retention saves money. A 2% increase in customer retention has the same effect as decreasing costs by 10%.
- Satisfied customers buy more. The revenue impact from a 10-percentage point improvement in a company’s customer experience score can translate into more than $1 billion.
But although retailers may work hard on creating an outstanding CX while customers are browsing and buying, there are some overlooked aspects that they may not be considering as part of their holistic strategy. For example, consider the inadvertent effects of an overly aggressive fraud prevention approach. Customers could end up having a bad experience with your brand in two major ways: 1) They are denied outright, because the tools you’re using have flagged them (incorrectly) as fraudulent, or 2) They have to jump through extra hoops to make a purchase, which just end up feeling too onerous to bother with.
As a company that helps online businesses navigate the tricky line between managing risk and adding too much friction, we hear plenty of stories about how even some small changes to how you fight fraud can make a big difference to customer experience (which can lead to some pretty impressive results…like a 15% increase in conversions).
Here are a few tips for tweaking your approach:
1. Is everyone involved in customer experience communicating?
Before making any changes, make sure your risk, marketing, and sales teams are collaborating. These teams should understand that they – like everyone at the company – share a common goal: growing business and keeping customers happy, without increasing risk. Each group’s actions affect the other’s results.
For example, when marketing makes a change – let’s say introducing a new coupon code field – that introduces new challenges for the fraud team that they should be aware of. And if the fraud team tweaks its criteria for when it sends an order to manual review, that could affect the CX for legitimate customers…and the marketing team’s expected conversion rate.
2. Does your fraud-prevention tool understand nuance?
When new customers come to us with concerns about too many legitimate customers being incorrectly denied, we can usually trace it to a common cause: over-reliance on a rigid, rules-based approach to preventing fraud.
Thousands of signals can be red flags for fraud, from IP address to the time an order is placed – and the riskiness of these signals may evolve and vary based on context. A trained machine learning fraud-detection system can learn from fraud that’s happened in the past, adapt to constantly-evolving patterns, and predict future fraudulent behavior.
Using the insights you get from machine learning, you can glean a nuanced picture of your site’s visitors based on behavioral, identity, and network patterns. The more data you collect, the more accurate the predictions that can be made. That translates into fewer false positives, and therefore happier customers – and more sales.
3. Are you dynamically adjusting the checkout experience?
The intelligence you get from machine learning isn’t just useful for keeping fraudsters out. You can use these same learnings to identify legitimate customers and streamline the buying process for them.
Remember the anti-fraud barriers, like passwords and purchase limits? Imagine you could identify a segment of your customers as low-risk before they even make a purchase. With that knowledge, you could direct them into a tailored checkout experience with no limits, no additional security checks, and fewer form fields.
It’s been well established that the less friction you include at checkout, the better your conversion rate. An estimated 18% of consumers who abandoned their online shopping card do so as a result of checkout page complexity.
Creating an outstanding CX requires incredible attention to detail at every stage of the purchase and payment process. Shoppers don’t think about the story behind a single bad experience – but they do remember it.