Retailers have worked hard and done a commendable job in making their digital sites inviting. They’ve amped up their personalisation and site search to make shopping a breeze. They’ve pared the steps in their checkout processes and sped up delivery dramatically.
But what happens when a customer claims that the sped-up delivery never made it to his or her home? Or what if the product that was delivered was nothing like what the customer expected, based on the website descriptions and photos? What happens when customers claim they never placed a particular order your records show they did?
Often, these claims result in a chargeback, which, if it is proved valid, means the retailer must repay the cost of the order. Fair enough, if the person making the claim was actually harmed.
Sifting good customers from fraudsters: a significant puzzle for retailers
But is the customer always right? Of course not. Unfortunately, there are those who are out to do retailers wrong. But how does a retailer know — good customer or greedy crook?
Cases in which a customer reports that something went wrong with an order are actually the most fraught interactions between consumer and retailer.
If the customer is telling the truth, and a retailer challenges the customer, the two are likely through. Who wants to shop with an establishment that is essentially calling you a liar and a crook?
But if the customer actually is a liar and a crook, the retailer stands to lose money, not just on the transaction in question, but on those initiated by other liars and crooks. And once word gets out among those with no qualms about taking advantage of retail enterprises, the losses will only spiral.
‘Friendly fraud’ is anything but friendly to a retailer’s bottom line
Retailers lose an estimated USD15 billion a year to friendly fraud or customer abuse, based on Signifyd’s internal analysis and research. They risk losing billions more by insulting legitimate customers whose claims they dispute. It’s a painful challenge, but one that ecommerce innovators are now tackling with serious solutions.
Ecommerce innovators have done a solid job of protecting retailers from fraudsters at the point of transaction. Guaranteed fraud protection, a relatively new fraud management model, uses big data, artificial intelligence, and domain expertise to sort fraudulent orders from legitimate orders in milliseconds. And the model protects merchants from fraud-related chargebacks, by offering merchants a guarantee that they will be reimbursed for all costs, should an approved order turn out to be fraudulent.
But retailers still must deal with a host of chargebacks that result from circumstances other than the unauthorised use of a credit account. There is INR or item not received, and SNAD or a product that was significantly not as described. There are times consumers don’t recognise the payee’s name on their credit statement because a business entity’s name is different from the merchant’s name. And there will be times cardholders aren’t aware someone else in their households used their cards for a purchase.
The trick is for retailers to sort out which complaints are legitimate and which are being made by those attempting to take advantage.
Choosing your battles when it comes to chargebacks
As a retailer you don’t want to blindly challenge every non-fraud chargeback. Sure, you might prevail over some evil-doers, but the collateral damage to your good customers is too high a cost. Nor do you want to accept every chargeback that rolls in. It’s a recipe for crushed margins and eventually insolvency.
Instead, progressive retailers are turning to the next logical solution, a form of chargeback management that relies on the same sort of big data, artificial intelligence, and domain expertise that guaranteed fraud protection relies on. The solution determines which non-fraud chargebacks are real complaints from honest customers, and which were initiated by scammers.
Moveover, the model emphasises focusing on eliminating chargebacks in the first place by encouraging merchants to review their policies and procedures to ensure that a retailer is communicating with customers. Transparent and clear communication can go a long way toward eliminating problems before they arise.
Pairing this new way of managing chargebacks with guaranteed fraud protection provides a way of dealing with all manner of chargebacks, from the point of transaction through and beyond delivery.
The powerful combination fills in yet another gap in retailers’ efforts to build a customer experience that attracts new customers, and keeps current customers coming back time and again.
By adding the ability to efficiently and effectively manage post-purchase disputes with customers, retailers are christening a new era of customer experience. Leading retailers today understand that conversion is not the only, or perhaps even most important, metric that matters.
In order to succeed today, at a time when consumers have nearly endless shopping options, retailers need to build a customer experience after the buy button that is every bit as memorable as the experience that got the customer to buy in the first place.
About Stefan Nandzik
Stefan Nandzik is Signifyd’s vice president of corporate communications. His ‘what if’ approach to business problem-solving constantly challenges conventional wisdom and means that he is never afraid to upend the status quo to lead change.
About Signifyd
Signifyd enables merchants to grow with confidence by providing an end-to-end commerce protection platform. Powered by the Signifyd Commerce Network of more than 10,000 merchants selling to more than 250 million consumers worldwide, its advanced machine learning engine is able to protect merchants from fraud, consumer abuse and revenue loss caused by barriers and friction in the buying experience. Signifyd counts among its customers a number of companies on the Fortune 1000 and Internet Retailer Top 500 lists. Signifyd is headquartered in San Jose, CA., with locations in Denver, New York, Barcelona, Belfast, and London.
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