During the holidays, e-commerce businesses know that fraud can run rampant. That’s the impression anyway, but is it actually true?
What is true is that a lot more people are shopping and spending money, both online and off during the holiday season. This year, e-commerce holiday revenue is expected to increase by 11%—from $83 billion in 2015 to $92 billion in 2016. The increase in the number and size of transactions will certainly result in an increase in fraud in absolute terms, although fraud is not necessarily higher when measured as a percentage of total transactions.
So, how does an e-commerce merchant optimize their business for the holidays? Fraud solution provider Kount sums it up well: “Merchants don’t win by only stopping fraud. They win by approving the maximum number of orders…while safely and cost effectively mitigating fraud.”
This is because revenue which is lost from declining legitimate transactions can be actually a much bigger threat to a company’s bottom line than accepting fraudulent orders. Some estimates put the number of declined orders that are actually legitimate at 60%, on an average day. But during the holiday season, this number rises to 80%. This means that during the shopping frenzy that is the holiday season, merchants decline a greater percentage of orders that are actually legitimate than they do during the rest of the year. And they’re losing money because of it.
This happens because the volume of transactions results in fraud decisions that are less accurate. This is especially true the more reliant an e-commerce merchant is on manual fraud management processes and solutions. Customer service and other reps simply don’t have the manpower to keep up with the increased number of transactions. To be safe, staff reviewing orders may be more inclined to deny transactions that appear to be suspicious, thinking they’re doing the right thing by preventing fraud, but not realizing the significant impact to the business’ bottom line.
The solution? Increased automation in how your business deals with fraud. Recurly’s fraud management solution, for example, lets our customers choose from a preselected set of rules which are based on the latest known trends and tactics being used by fraudsters. Recurly customers decide how aggressive or lenient they want to be in dealing with potentially fraudulent transactions, which are run against the set of rules and automatically approved or declined based on the criteria and the settings. Custom rule settings are also available to companies that want more control.
The holiday season is a time when many businesses make a significant part of their revenue. Don’t deny legitimate customers who want to buy from you! Certainly, be wary of fraud. But take advantage of the tools available that will help you fight smarter, not harder.
To learn more about Recurly’s fraud management solution,view our data sheet. Or sign up for a demo below.
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