Whether the fraud was intentional or not, it can become a habit if the customer finds there are no consequences. CreditCards.com reported that half of consumers who file one successful chargeback will file another within a few months, so we expect to see this trend continue in 2021.
The solution: Following card brand’s guidelines for collecting transaction data can help, as can disputing chargebacks quickly. Your fraud prevention system should take customer behavior and purchasing history into account to avoid friendly fraudsters, and you may want to look for a fraud service that offers chargeback insurance or a chargeback prevention guarantee.
Customer expectations will remain high
Despite the fraud challenges that merchants will continue to face, implementing strict automated fraud controls isn’t enough to protect your business from losses. That’s because fraud detection programs that automatically turn down orders raise the likelihood of false positives that can decrease your order volume and drive away good customers.
In March 2020, just before pandemic-related shutdowns hit many parts of the world, Sapio Research surveyed more than 1,000 online shoppers for ClearSale in each of five countries: the U.S., the U.K., Canada, Mexico and Australia. Sapio found that while 90% of all consumers surveyed said security was very important to them while shopping online, they also had very high standards for customer experience.
In particular, many customers were not forgiving of fraud screening errors by merchants.
- 42% said that if a merchant declined their payment, they would not try again to complete the transaction.
- 39% said they would never place another order with a merchant who declined their payment — but only 13.6% would abandon a merchant after experiencing fraud in their store.
- 28% said they would likely post a comment on social media about their experience if a merchant declined their payment.
Even before e-commerce became the default shopping method for many people worldwide, nearly 4 out of every 10 shoppers would abandon a merchant over a false decline. Now, after a year of relying heavily on e-commerce, customer expectations are higher, and patience has worn thin with bad experiences. In October, the American Customer Satisfaction Index reported that consumer satisfaction with online retailers declined by 4.9% from April through September.
The solution: Manually review orders that your fraud detection program flags as possible fraud. An expert can usually determine quickly which orders are good, so they can be approved, and you can keep those customers.
Because customers have such high standards for their online shopping experience, and because fraudsters found new ways to target merchants in 2020, it’s important for merchants to go into 2021 with two goals. The first goal is to prevent false declines that can insult and drive away good customers. The second goal is to continuously improve and refine your fraud prevention tools and strategies in order to protect your business over the coming year.
Rafael Lourenco is executive VP and partner at ClearSale, a card-not-present fraud prevention operation that helps retailers increase sales and eliminate chargebacks before they happen. Follow on LinkedIn, Facebook and Twitter.