ClearSale is an ecommerce fraud protection solution committed to helping e-commerce businesses stop fraud, sell more, and create better consumer experiences. In this interview with TechBullion, ClearSale’s EVP, Rafael Lourenco will be sharing more details on ClearSale.
I’m Rafael Lourenco and I serve as EVP & Partner at ClearSale. My background is as a statistician with a masters in both finance and economics, and I currently have over two decades of experience providing ecommerce fraud detection and prevention services, mainly in international markets. When I joined Clearsale, the company was still in its infancy, and I’m proud to have been an integral part of ClearSale’s tremendous growth over the years (from 25 to more than 3,000 employees – including more than 1,500 highly trained fraud analysts).
ClearSale is the world’s most comprehensive CNP fraud protection services company. Our complete, data-science-backed fraud solution prevents chargebacks and false declines to optimize the online shopping experience.
Ecommerce fraud and chargebacks quickly chip away at a retailer’s bottom line, and false declines can turn legitimate customers away. This is why ClearSale focuses on both chargebacks and false declines. ClearSale combines sophisticated A.I. technology and expert manual reviews to help maximize a business’s revenue, approve as many valid orders as possible, and keep customers happy.
In 2021, retail ecommerce sales amounted to approximately 4.9 trillion U.S. dollars worldwide. This figure is forecast to grow by 50 percent over the next four years, reaching about 7.4 trillion dollars by 2025. We are seeing ecommerce quickly scale, to the point that it could overtake brick and mortar commerce within a decade!
In terms of trends, there’s three that come to mind:
1) We see more businesses working harder to keep shoppers online. When the lockdowns and stay-at-home orders began and businesses were forced to close, people had no choice but to turn to ecommerce. Online shopping became the safest and most convenient way for them to spend money on needed (or desired) items. With more ecommerce customers, there was a higher frequency of online shopping and greater ecommerce spending. However, as things are opening up, online spending has slowed. This means that retailers have to find other ways of keeping shoppers online, whether that be increased personalization, better user experience, or availability of more payment methods.
2) For industries that didn’t already have an ecommerce website or were beginning to develop a digital presence from scratch, they seemed to struggle more out of the ecommerce gate. The businesses that have fared the best in the new era of ecommerce are the ones who have been neck-deep in ecommerce since long before the pandemic or “pure players” whose primary objective is selling online.
3) We also see blurred borders for online shopping. As ecommerce continues to grow, this opens consumers and businesses to cross-border ecommerce as online shopping makes it easier to shop and connect with audiences all over the world. This, however, also brings in higher risks to fraud and overall security as the as this gives access to fraudsters world-wide.
4) What is the current state of consumer attitudes on Ecommerce and Fraud, and what is ClearSale’s approach to this?
With ecommerce continuing to grow and along with it competition for every site and product category, consumers are becoming less and less tolerant of false declines or complicated checkout experiences. 35% of shoppers who responded to our survey said they would jump ship if the checkout process was too long. Especially with the digital landscape becoming such a staple in our everyday lives, having excellent online customer experience and as little friction as possible during the checkout process is essential. 40% of consumers also said that they would boycott an ecommerce merchant if they encountered a false decline. Because ecommerce consumers have so many options to turn to when shopping online, it’s important for retailers to protect their business from fraud to ensure that their customers will return.
Similar to the idea that consumers are becoming less tolerant of complicated experiences, we’re seeing consumers, particularly the younger generations, favor alternative payment options (such as digital wallets) over the physical credit card at checkout. With only 20% of shoppers younger than 55 saying that they have their credit card on hand when shopping online, it’s clear that the more digitally-savvy generation is looking for the payment option that requires the least amount of work to get them through the checkout process.
As the dust from the last couple of years is beginning to settle, new shopping habits are starting to feel comfortable and familiar and new shoppers are narrowing down which businesses will become their mainstays. To take advantage of this opportunity to grow revenue and brand reputation, ecommerce merchants should focus on providing an excellent, personalized customer experience — which includes fraud protection. Fraud protection is the most important thing to consider when businesses think about how they should adjust to this acceleration of ecommerce. As a vital piece to a retailer’s CX strategy, fraud protection — either in-house or outsourced — needs to be focused on approving as many good orders as possible. By providing a streamlined fraud prevention service that uses AI technology to scan every order to detect common fraud patterns (and declines or approves orders based on a given score) as well as a seasoned ecommerce fraud analyst who manually reviews every suspicious order, ecommerce businesses will be able to provide the excellent CX that will help retailers keep their customers.
Ecommerce use skyrocketed during the pandemic for casual users, but it also did something we haven’t seen yet in modern times – our report found that there was a 13% growth in users who had never before been an online shopper. That is a huge increase in such a small amount of time!
While this growth opened up a broader revenue stream for ecommerce merchants, it also increased the risk for false declines. Most fraud algorithms don’t know how to handle first-time buyers with no purchase history, so their purchases are flagged as high-risk and auto-declined. That would leave many retailers missing out on the influx of legitimate first-time buyers. On top of that, those buyers who may not be familiar with why their order is being declined are likely to never return to that business.
Because younger consumers have grown up around and are familiar with technology, they’re more open to the ease of using digital methods of payments versus a physical credit card. The most preferable payment method among this demographic is the mobile wallet / contactless payments. 92% of respondents to our survey said they always have their mobile phone in hand when they’re shopping, which makes mobile wallets so simple for them.
I think, when it comes to familiarization, trust and familiarity go hand in hand. For younger consumers (Gen Z and millennials), they grew up in highly personalized environments, particularly online. The technology that’s foreign to older generations is the only experience that younger folks are familiar with. Because of this, personalization has become table stakes for younger generations to feel engaged with, and loyal to, an ecommerce retailer. On the other hand, older generations are more interested in knowing that their information is secure. Many of the data permissions required by personalization features go against every safety and security warning that older generations have been inundated with since the internet was introduced.
To guarantee better checkouts, ecommerce businesses can prepare their customers throughout the buyer journey by communicating shipping rates, additional fees like taxes, and delivery windows clearly on each page of the website (including at checkout) so that customers aren’t surprised when they’re ready to pay. To reduce cost-related cart abandonment, businesses should offer different shipping options that meet customer expectations. When shoppers see varying price ranges, they’ll be less likely to leave without completing their order.
Ecommerce businesses also need to offer their customers payment options that they trust. Some consumers have abandoned a purchase because they didn’t trust the website with their credit card information. Retailers can overcome this concern by offering payment options such as digital wallets that don’t openly require customers to enter credit card information.
While the ease of digital wallets is appealing, businesses can also offer an efficient purchase process with the option of creating an account that securely stores their billing and shipping addresses, contact information, and preferred payment methods and auto-fills them at checkout. I want to make it clear that retailers should offer this option, but they shouldn’t require it. More success will come from account creation offers that make repeat purchases and order tracking more convenient, but still allow customers to check out as guests so they can make their purchase quickly and efficiently.
Lastly (and, in my opinion, most importantly), businesses should reduce their false decline rate in order to ensure that good customers are not turned away at checkout. By having less complex checkout processes and AI-power fraud detection algorithms that incorporate behavioral biometrics, validated data, and manual review of orders, you can keep your customers happy and guarantee better checkouts.
The consequences of false declines are that businesses can lose both an order, that customer’s lifetime value, and the marketing budget that was spent bringing that customer in. Studies have found that for every dollar in fraud, a merchant loses nearly $13 to false declines!
Across the board, consumers don’t respond well to being declined in error. According to our report, 40% of consumers surveyed said they would never place an order with the same merchant/website again if their order was declined. 34% of consumers surveyed said they would post a negative comment about a merchant/website on a social media platform if their order declined. 60% of consumers would at least consider reaching out to customer service to try again; however, 21% would not. This is a substantial amount of business to potentially lose – forever – over a mistake.
So what can ecommerce businesses do to fight this fraud effectively without scaring away new customers or angering longtime customers?
Before doing anything else, it’s essential for retailers to understand their complete fraud picture: their cost of lost merchandise, how much they’re currently spending on fraud protection, how much they’re losing to chargebacks, whether they’re declining good orders, and the lifetime potential value of those lost customers. Card-not-present (CNP) fraud costs online businesses more than $6 billion per year and retailers in the US lose almost $18 billion each year to false declines.
Businesses should also avoid auto-declines and deny lists (blacklists). It’s important for a retailer’s fraud prevention strategy to take each customer’s individual situation into account. Just like an ecommerce shopping experience should be personalized, so too should fraud prevention strategies. This broad “set it and forget it” approach to fraud will ultimately do more harm than good. Retailers should understand why declines occur and understand how to best tailor fraud detection system/strategy based on the their shopper’s unique behaviors.
Ecommerce businesses should also consider supplementing their fraud prevention strategy with manual fraud review. While advances in AI technology are made every year, artificial intelligence still has a long way to go before it parallels the fraud detection capabilities of the human brain. Performing manual reviews will help you flag genuinely fraudulent orders, approve more legitimate purchases, learn to distinguish between the two, and improve the accuracy of future reviews. But because manual review can be time-consuming, especially for businesses looking to grow, combining manual with technology is key.
At ClearSale, we use AI and machine learning to provide initial screening for our clients’ transactions. The AI quickly approves obviously legitimate transactions and flags the others for manual review by our in-house expert fraud analysts who quickly and thoroughly put together the rest of the puzzle to determine if the transaction is legitimate or not. Adopting a similar approach for other businesses can deliver great fraud protection at scale, without worrying about legitimate customers experiencing fraud.
If you’re following ecommerce best practices, you can be effective regardless of the industry that you are in. Make sure you are considering your ecommerce offerings as its own endeavor – too many times we see retailers put up an ecommerce shop without spending much time on it, and then they wonder why they haven’t sold anything. What your product is and what your average order value is isn’t as important as giving your digital transformation efforts the time and focus it deserves. Considering CX, streamlining your buyer journey, creating a marketing plan, securing your customer’s data and payment information, etc. are all ways you can be successful in ecommerce.
If there’s anything we haven’t answered or for all things ecommerce and retail success, please check out our State of Consumer Attitudes on Ecommerce, Fraud & CX 2021 Report or visit our website and our blog!
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