Expansion without growth?
Businesses have never had a better chance to grow. The opening up of communications, technological advances and access to new markets means many merchants are expanding geographically, online and through the payment mechanisms they offer.
However, many of the organisations embracing multi-channel sales online could be missing out on maximum revenue because their fraud management strategy isn’t optimised to let the high-rollers in and keep the tricksters out.
Fraud management is often seen as a byword for fraud prevention, in other words, the act of detecting fraudulent transactions, preventing criminals from receiving goods and ultimately reducing chargebacks, reputational damage and fines from the bank.
If this is taken care of then it’s job done and a well-oiled stance on prevention means this area of business rarely crosses boardroom tables. This is a big mistake.
Anti-fraud key performance indicators are not hard to achieve with a stringent system that throws the baby out with the bathwater by blocking entire IP or BIN ranges, for example. It reduces chargebacks, but will also stunt revenue growth and damage the experience of genuine customers.
People who are rejected for a purchase with no good reason are unlikely to return, meaning a slice of business investment in sales and marketing is wasted, not to mention the reputational damage of negative customer reviews online or via word of mouth.
A DataCash customer adopted a tailored, precise approach and increased their online sales by 54 per cent while fraud fell by 91 per cent
An even more problematic aspect of this issue is that VIP customers – big spenders or loyal fans – often portray behaviour similar to that of fraudsters, with big one-off transactions or regular visits to your website.
Consider the example of a customer with a London billing address who books a flight that departs within two hours to a noted “high-risk” country. Once the customer lands, they make a series of high-end purchases before flying home 48 hours later. Are they a fraudster or a successful high-value businessperson?
For some organisations, the answer is to adopt a stripped-down anti-fraud system, under which chargebacks soar and are taken on the chin, in return for more happy customers. But the loss of goods, bank fines and reputational damage make this a flawed course of action too.
What merchants may not realise is that there is a third way incorporating the best of both worlds – a sophisticated fraud management system that provides a positive genuine customer service and allows honest VIPs to shop at their leisure. This system accurately detects fraud and protects revenue – the perfect combination.
This is a multi-layered approach to fraud, which incorporates different technologies and experience-based intelligence. It closes loopholes left open by singular approaches and pays equal attention to positive indicators as negative ones.
The approach should be tailored to different sales channels and different geographical locations. Fraud trends are different all over the world and criminals target different sales channels in different ways, so a one-size-fits-all approach to expansion is redundant.
The proof is in the pudding. An airline merchant – a customer of DataCash – adopted this tailored, precise approach and in doing so increased their online sales by 54 per cent during a four-year period. At the same time, fraud fell by 91 per cent.
Growth is an essential ingredient of success, but optimising sales should be part of any organisation’s growth strategy. With the right fraud management provisions in place, it is possible to electrify growth without succumbing to the debilitating effects of fraud.