Early data from the 2016 holiday season highlight three trends—and questions—sure to have a major impact on online payment processors, payment gateways, hosted payment pages and e-commerce platforms in 2017:
E-commerce sales continue strong growth. After a slight lull in 2012-2014, projections show 2016 e-commerce holiday sales will grow 17.2 percent, building on the strong 16 percent increase of the 2015 holidays. In all, 2016 holiday e-commerce sales will total nearly $95 billion.
- How will you capture your share of growing e-commerce merchant volume in 2017?
Mobile commerce is red-hot. M-commerce will see continued explosive growth, up 43 percent during 2016 holidays after a 47 percent increase for the 2015 season. In fact, Black Friday 2016 was the first day ever to generate more than $1 billion in mobile sales.
- Are there ways you can help merchants capitalize on the mobile commerce phenomenon in 2017?
Fraud and chargebacks continue to break records. A reported 12 percent increase in online fraudulent activity is projected for the 2016 holidays. However, some merchants are reporting never-before-seen-rates of card-not-present (CNP) and m-commerce fraud attacks, with increases as high as 122 percent!
- What steps can you take in 2017 to minimize this source of friction between you and your merchants?
Surprisingly, the answer to question No. 3 may be also the key to successfully answering the first two questions. How? By implementing fraud prevention at the platform level, you can provide your merchants with a value-added offering that not only protects them against fraud and chargebacks, but actually helps you enhance growth while protecting your bottom line.
High-level fraud prevention at the platform level is not yet the standard among the tens of thousands of online payment processors, payment gateways, hosted payment pages and e-commerce platforms worldwide. However, leading companies like 3d Cart, BlueSnap, Braintree, Chase Paymentech, Demandware, GoECart, Lime Light, Magento, maxiPago!, Mozu, Oracle ATG Web Commerce and X-Cart.Like are seeing strong returns after implementing this strategy.
|“Most processors don’t offer high-level fraud prevention built in. That sets us apart. It opens new ways for us to talk to prospective customers. Our business has doubled while the chargeback rate for our merchants has declined 500 percent.”
—John Johansen, BlueSnap
Retain existing merchants, win new business, and grow your portfolio. As offerings from payment processors become more commoditized, it gets increasingly difficult to differentiate your business. Last year, thousands of niche and new competitors entered the payments processing market, with many resorting to price-cutting to win business. What’s more, there are now hundreds of consultants whose specialty is helping merchants negotiate fees and rates. If competing on cost is your only weapon, you may have no choice but to surrender to their demands or lose business.
Fraud prevention at the platform level provides a smarter alternative to discounting by offering merchants better overall financial performance:
- Reduced losses through fewer chargebacks and fewer product losses
- Greater revenue through fewer false positives and higher approval rates
- Reduced operating costs thanks to fewer manual reviews
Frictionless onboarding of new merchants. As competition for merchant business intensifies, the ability to quickly accept and onboard a new merchant can be the difference between winning new business or watching it go to a competitor. Yet aggressively adding new merchants without fully understanding their risk profiles can lead to higher rates of CNP or mobile fraud within your portfolio. With fraud prevention at the platform level in place, you can quickly and confidently onboard new merchants with better underwriting that ensures you appropriately price for their risk profiles. And being able to say “yes” more quickly than other processors gives you a competitive advantage.
Maintain margins. Interchange fees are not going down. Offering fraud prevention at the platform level as a value-added service—instead of discounting or price cutting—helps sustain profitability. At the same time, the “continuous onboarding” that fraud prevention at the platform level makes possible allows you to easily monitor merchants after initial acceptance to ensure their continued adherence to statements made during onboarding. This helps reduce fraud and chargeback rates across your entire portfolio and prevents unexpected increases in the fees you pay to issuing banks. As an added bonus, you can also more easily detect activity that violates regulatory prohibitions—for example, money laundering—and avoid messy legal problems.
What type of anti-fraud system will you need if you decide to institute fraud prevention at the platform level? The list below summarizes some of the most important capabilities required to ensure you achieve optimal effectiveness while earning maximum ROI:
- Integrated, best-in-class fraud screening. Technologies such as device fingerprinting, geo-location, transaction velocity, proxy piercing, order linking, personas, etc. are the essential building blocks of any successful anti-fraud system. And integration ensures maximum effectiveness and the lowest operating costs.
- Automation powered by artificial intelligence (AI) + rules engine. AI reveals trends within big data at speeds far beyond human abilities. Rules let you respond to human adversaries who are thinking, adaptable and strategic. Automation combines both of these capabilities to enable split-second decisioning using real-time data for faster transaction processing, reduced fraud, lower operating costs, fewer false positives and higher sales.
- Mobile-optimized screening and rules. This capability addresses question No. 2: “Are there ways you can help merchants capitalize on the mobile commerce phenomenon in 2017?” In addition to mobile device detection, mobile geo-location, mobile proxy-piercing, and other best-in-class mobile fraud-screening technologies, the inclusion of a software development kit for mobile fraud prevention is essential for supporting mobile shopping apps, one of the hottest trends in m-commerce. Integration of mobile anti-fraud prevention into an overall solution is also essential for speeding mobile checkout and increasing mobile conversions.
- Ease of use. To be able to quickly onboard large volumes of merchants, processors need a system that’s simple and straightforward, and that doesn’t require IT intervention for everyday tasks like rule modifications, threshold adjustments or other fine-tuning. For merchants, simplicity helps speed rule-making and implementation to enhance effectiveness while reducing operational costs.
- System availability and uptime. A transaction not processed is an opportunity for revenue and profit lost—for both you and your merchants. Keep in mind that 99.0 percent uptime may sound great at first glance, but it equals nearly four days of downtime every year. A recommended 99.99 percent uptime is more manageable with less than 40 minutes of downtime throughout the year. Make sure you and your merchants are protected without interruptions or service gaps that leave you vulnerable.
While “doing-it-yourself” to achieve these capabilities is certainly an option, the online payment processors, payment gateways, hosted payment pages, and e-commerce platforms mentioned above all chose to leverage a third-party solution to deliver fraud prevention at the platform level. Their reasons for doing so were varied, centering mostly around speed-to-market, reluctance to incur higher capital and IT expenses, and the cost of bringing on additional in-house fraud prevention expertise. But perhaps the most important consideration was focus. In other words, did they want their core mission to be payments processing? Or fraud prevention?
As you consider a New Year’s resolution to improve fraud prevention in 2017, remember that implementing fraud prevention at the platform level not only protects your merchants, but actually helps you enhance growth and protect margins and profitability.
Donald Bush is the vice president of marketing at Kount. Don has worked in several management roles within the technology segment for more than 20 years. To learn more about fraud-prevention-as-a-service, please visit this link to download the eBook “Protect Your Merchants. Protect Your Profits.” Don can be reached at firstname.lastname@example.org.
In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.