The final steps at any eCommerce checkout are crucial for merchants. However, implementing multi-factor authentication to fight fraud can result in stumbling blocks for customers – a frictionless experience is the key to success.
An anti-fraud management strategy can make or break eCommerce businesses. Effective solutions can lead to increased sales, whereas inefficient methods can result in loss of income and impact reputation. Countries in the European Economic Area are voluntarily implementing PSD2/SCA (Payment Services Directive/Strong Customer Authentication) regulations requiring merchants to incorporate multi-factor authentication for transactions to prevent fraud. The worry is that customers will experience more online shopping friction and abandon carts. But there is a solution to avoid a messy checkout experience.
The Effects of Checkout Friction can be huge
There’s nothing worse than having fantastic products to sell to the world, but also having to juggle eCommerce checkout abandonment. According to the Baymard Institute, based on 44 studies, the average abandonment rate is 69.8% for all transactions. This is food for thought as 700 out of 1000 potential conversions are discarded.
Using a sample of 4,300 US adults asking their reasons for abandoning checkout, the main cause given was the high price of goods, shipping fees and taxes, amounting to 49%. Furthermore, simply being asked to create an account with the merchant amounted to 24% of abandoned carts, and a further 18% cited the checkout process being too long and complicated as the main problem. The picture is similar across the world. The mark of a successful eCommerce transaction is the ease with which inexperienced and seasoned online shoppers can find what they are looking for. Then make a purchase without encountering stumbling blocks (genuine or perceived) at the checkout.
Payment Multi-Factor Authentication will become Standard. Will Friction increase?
And all these hiccups have to be juggled with before even considering the myriad of online payment regulations every business must adhere to. Particularly now as the European Union’s PSD2/SCA regulations are slowly but surely implemented across the region (the UK has postponed until March 2022). The SCA element of the directive requires multi-factor authentication for payments using the 3DS2 protocol (3D Secure 2.0 for credit and debit cards). As PSD2 has gone into effect throughout Europe, many merchants have experienced these issues first-hand and on their bottom line. In France and Spain, merchants have experienced a 25% decline in conversion rates, which is better than merchants in Germany and Italy who have seen conversions decline by over 30% and 40% respectively. Entering account details can cause friction, any additional steps may compound a frustrating user experience.
There is, however, the possibility of an exemption to SCA through the Transaction Risk Analysis (TRA). This allows avoiding high-friction verification for transactions of low risk and low value. However, only in situations where a merchant ensures the safety of the payment service user’s funds and personal data. In reality, merchants must have an effective anti-fraud system in place that ensures fraud levels are kept to a minimum.
Is Ineffective Anti-Fraud Management Contributing to Checkout Friction?
Once customers enter the online checkout phase and begin the process of paying for goods and services, this is the crucial moment when a final sale can be made or broken. By trying to prevent fraud, the customer journey can end prematurely when a legitimate transaction is flagged as a false positive through ineffective fraud detection methods. Genuine customers desire a quick and smooth experience, so to be flagged for supposedly carrying out a fraudulent transaction can result in a negative experience. Even negative online feedback for the merchant. The shopper at this stage, without hesitation, will search for their desired item(s) through another online store with a more efficient checkout process.
To improve and maintain the growth of sales, an advanced anti-fraud solution is required that automates the fraud detection process. This protects businesses from the overbearing costs of fraud, but more importantly, ensures a smooth shopping experience for customers. Happy customers result in converted sales and increased revenue. It all sounds so simple, but how can merchants make the changes required and enjoy the benefits of SCA exemptions?
Less Friction, More Customers
Finding the perfect anti-fraud solution can be difficult. But a fruitful end-result serves as a key motivating factor to find the best option available. But even with a fraud-fighting strategy in place, the SCA can still lead to checkout friction that may leave merchants feeling frustrated. Despite having a desire to fight fraud, they inevitably use an ineffective fraud management system that will impact sales by causing customers to experience friction with authentication steps. This can even lead to a 20% decrease in transaction acceptance rates. The answer is to find a company that has taken all these factors into consideration to ensure merchants and customers are happy, whilst taking advantage of SCA exemptions afforded to them. It sounds perfect for the customer, but sounds like a lot has to be done in the background by the merchant, surely? Not necessarily.
Prevent Fraud and Increase Sales with Advanced Machine Learning
The principle is beautifully simple and delves into the world of computer science. Using an advanced anti-fraud solution based on continually updated machine learning (ML) models results in the majority of the fraud-fighting taking place in real-time. Automatically, over 5,000 pieces of data are scanned to detect fraudulent activities.
One of the company’s offering an advanced ML anti-fraud tool is Nethone, a fintech company with its proprietary technology. Nethone understands the importance of maintaining an effective fraud prevention system, whilst ensuring a top-level customer experience. Using an advanced anti-fraud solution works in line with a merchant’s systems in the background of every transaction, unseen by the customer. When a payment is made, the user experience is at the forefront, as is the continuous anti-fraud analysis. The result is to minimise genuine fraud, false positives, chargebacks and manual reviews. The positive effect is a frictionless online shopping experience for customers, bringing increased revenue for the merchant.
An additional benefit of using behavioural biometric data and digital fingerprinting is that it acts as an authentication factor in line with PSD2/SCA. So in effect, a payment is marked as genuine or fraudulent without customers becoming frustrated at the checkout. Through the use of such a solution, the eCommerce merchant remains within the new regulations. A perfect example of a win-win situation.
CTA: If you liked this article and would like to learn more about expert eCommerce anti-fraud analysis and solutions, visit Nethone’s website: https://nethone.com
Started in 2016, Nethone is a fraud protection company committed to solving fraud and reducing unnecessary transaction friction through a better understanding of online users. Our advanced proprietary Profiler and machine learning models effectively prevent payment fraud and protect merchants and their clients by understanding every user behind a transaction. Nethone has grown to over 70 employees including a dedicated team of Data Scientists and IT security experts who cooperate with global players in eCommerce, digital goods, and financial industries.