Riskified, a solution provider for eCommerce fraud prevention and revenue capture, has released its first annual shopping and fraud behaviour report. The report details the findings from a new consumer survey about online buying habits and reactions to credit card fraud.
Riskified surveyed 5,000 US-based consumers about their online shopping behaviours, experience with and prevalence of credit card fraud. They also asked about repeat shopping likelihood and customer satisfaction. This enabled the company to develop a comprehensive picture of how consumers react to a number of common shopping experiences.
US consumers worry about credit card fraud
The results are worrisome for both consumers and merchants. Approximately half of respondents reported experience with credit card fraud. Furthermore, 30% had their purchase wrongly declined. This led to a corresponding negative impact on their satisfaction and return shopping.
For US consumers, eCommerce credit card fraud is nearly an inevitability. Overall, 49% of consumers surveyed reported having been a victim of credit card fraud. Their card information was illegally used by someone else. But that percentage grew with age, suggesting that becoming a victim is only a matter of time. Among all respondent groups aged 31 or older, a majority of consumers were the victims of credit card fraud.
Unfortunately for merchants, the obvious costs of fraud aren’t the only costs. Forty-nine percent of customers reported that they do not return to an online retailer after a fraud incident has taken place. This meant that the merchant will pay the cost of the security breech and lose future customers.
Negative impact on brand
But that’s only part of the cost. Merchants often decline orders out of caution. Previous research conducted by Riskified found that fear of fraud costs even more than the incident itself, as merchants unnecessarily reject good customers. The survey bears that out, as 30% of respondents reported having an order declined. Fifty-seven percent of those declines happen to returning customers, squandering the good will merchants had built. The survey further found that roughly 42% of shoppers who experienced a decline moved on. Either abandoning the purchase completely (28%) or shopping with a competitor instead (14%).
Even shoppers who aren’t declined may move away from a purchase. Eighty-four percent of respondents reported abandoning an order before completing the purchase. Many of these shoppers blame the checkout process. Thirty-seven percent abandoned a purchase because of a complicated checkout, while 34.9% blamed a bad mobile experience.
“It’s really difficult for any single retailer to effectively manage their fraud. This survey shows just how damaging it is when they fail to do so,” said Eyal Raab, vice president of business development at Riskified. “Merchants need to be able to meet their customers where and how they want to shop. But offering options like omnichannel fulfillment or digital gift cards opens them up to threats. Making accurate decisions and approving good orders not only increases revenue now, it also makes happier, more loyal customers in the future.”
key findings from the survey include
Impact of household income on fraud and reimbursement:
- 48% of households with an annual income of $1M or more have reported legitimate purchases as fraudulent. This was by far the highest level of false claims of fraud, with no other income bracket even reaching 40%.
- Meanwhile, lower income households were least likely to be reimbursed for charges fraudulently made with their cards. Only 35% of lower income households were refunded the full amount of the fraudulent activity.
Customers blame merchants for fraud
- Among victims of credit card fraud, more than 1 in 4 (29%) blamed the merchant that approved the fraudulent purchase.
Friction leads to cart abandonment
- Cart abandonment continues to be a big problem for merchants. Eighty-four percent of survey respondents reported abandoning a purchase in progress.
- While some of that is unavoidable for merchants – unexpected shipping costs and a change of heart led to significant cart abandonment. A difficult checkout process is often the culprit. More than 71% of cart abandoners blamed the checkout process. Reasons cited included being overly complicated, not mobile optimised or seeming untrustworthy.
Shoppers watch their wallets
- 38% of respondents admitted they have or may have created multiple email addresses to gain additional online shopping discounts. While not illegal, this type of discount abuse can seriously impact merchants’ bottom lines.
Enterprise Times: What this means for retailers?
Another report that highlights the negative impact that fraud have on retailers, both in terms of revenues and the brand.
The Riskified report is comprehensive. It asked thirty questions, covering everything from how online purchases are made and on what devices, to consumer experiences with fraud and declines. It also investigates cart abandonment and merchant loyalty. The company then analysed the results across age, gender, and household income brackets.
In a nutshell, to survive in the competitive, omnichannel eCommerce universe, a business not only has to offer a quality product. They also have to stay ahead of fraudsters, beat the competition, and constantly grow more efficient.
Beating the fraudster, entails investing in all the necessary security infrastructures and protocols to protect consumer data. Failure to invest, could damage your brand and threaten your business revenues. Just look at Talk Talk.