Until as little as a decade ago, the separation of physical and digital retail ecosystems was hardly given a second thought. Fulfilment strategies, marketing materials, and customer service protocols could all exist in two distinct camps.
But, in continuing to atomise fundamental revenue streams, retailers today stand to fall behind the competition as consumer expectations undergo a seismic shift.
With the rise of the mobile, web and now an expanding metaverse, people expect more from platforms. By the same token, merchants are realising the need to offer an integrated shopping experience that can bridge the yawning gaps between channels.
Establishing continuity is quickly becoming a priority. Nearly 80% of executive leaders rank enhancing omnichannel experiences as a primary growth opportunity in 2023, according to Deloitte.
Rather than treating every channel as its own separate entity, the omnichannel model integrates the underpinning systems behind each of them to ensure a seamless and consistent customer experience across the entire business.
However, meeting the growing demand from consumers and regulators for a more cohesive approach is not all plain sailing.
Ever quick to adapt their tactics, fraudsters have wasted no time finding new ways to exploit opportunities in a world of fast digital payments and increasingly connected commerce.
By nature, omnichannel businesses can be exposed to fraud at multiple weak points, and although there are fraudulent schemes that target ecommerce generally, integrated models specifically have become ripe targets for bad actors. Retailers have reported instances of customers exploiting the omnichannel infrastructure by paying for an item online and then cancelling the payment directly before picking up their item. This can happen when the cancellation can’t be communicated in time to prevent the theft.
Other examples involve fraudsters using stolen credit cards and false identities to create online accounts with retailers, placing orders and then visiting the store to collect the item. By presenting a fake ID that matches the name on the stolen credit card, the risk of detection is reduced, and fraudsters can fly under the radar.
Research from Kount, a company that provides fraud management solutions, found that 90% of retailers are operating across multiple channels, yet only half are effectively managing fraud across them. If a retailer’s prime objective is to increase revenue, offering customers access to their products and services across a growing number of channels will be a necessity. There’s a growing pus for businesses to work towards openness and accessibility.
The problem is that fraud prevention solutions and strategies are often perceived to be counter to that, according to Simon Vallis, head of international partnerships at Kount. “When we talk to businesses, specifically to their fraud teams, about fraud prevention, we’re talking to less than 5% of the overall business in terms of priorities around security and fraud prevention,” he says.
“The majority of the business is focused purely on increasing revenue. The challenge for these organisations is making their products and services more accessible to customers while keeping the fraudsters out. As more businesses adopt an omnichannel strategy, the challenge becomes that much greater.”
Integrating multiple components or services may introduce new security vulnerabilities, especially if the integration points are not properly secured. To ensure the safe and seamless integration of new digital channels, retailers are advised to prioritise investment in the latest technologies, including AI and machine learning, that effectively manage account authentication and privacy and protect the business and the consumer from the risk of fraud.
Emile Naus, a partner at independent management consultancy BearingPoint, says: “If businesses don’t adjust their loss prevention activities, they leave themselves open to significant issues. Effective fraud prevention requires a multi-layered approach, which starts with retailers understanding their customers and setting up customer data effectively and securely.”
The increased complexity of retail ecosystems has created the potential for unintended gaps in security. “It might make sense to have differential pricing between channels, but it opens the door to customers buying in a lower cost channel and returning through the higher cost channel,” adds Naus. “This is not a new challenge. It’s been a long-standing issue for retailers that operate cross-border, especially with different currency and tax regimes. But the proliferation of channels has opened this issue up for many more retailers.”
Fortunately for merchants, advances are being made to protect them from the cost implications of online fraud. Systems like 3D Secure (3DS) provide an added layer of cardholder authentication for digital transactions. If the bank detects that a transaction might be suspicious, the card issuer redirects the shopper to a 3DS page for extra verification.
When this system is in effect, liability for fraudulent chargebacks shifts from the business to the card issuer. If a shopper denies they made or authorised a purchase because of a lost or stolen card, for instance, the retailer is left unscathed by the false claim.
While this has brought benefits for omnichannel retail businesses, Vallis says retailers are getting complacent. “The ability to transfer the liability to the issuing bank has meant that a lot of merchants feel that they are safe in just utilising that liability shift through 3DS as their fraud solution,” he explains.
Online shopping has never been easier or more convenient for consumers, who have access to a plethora of channels through which to engage with their favourite brands.
However, according to a recent report by Wunderman Thompson Commerce & Technology, 47% of retailers say there are simply too many channels for them to effectively deliver the best sales experience.
Rather than rushing to capitalise on every new channel that emerges, brands should be focused on optimising what they already have and educating themselves on the threats they face before implementing new channels, which includes keeping up to date with the latest fraud prevention tools.
“While many companies have robust internal systems operating alongside fraud prevention solutions sourced from external partners, a lot of companies have not realised that with the rapid advances in omnichannel, their internal systems are being left behind,” says Vallis says.
As ecommerce becomes more fragmented, with consumers flitting between new and established shopping ecosystems, businesses will need to double down on their fraud prevention efforts or risk falling behind on security, consumer trust and interoperability.
For more information, visit kount.com