This interview was first published in our Online Payments and Ecommerce Market Guide launched on 1 November 2017. The guide features several important thought leadership editorials from ecommerce and payments industry professionals, which makes it a top-reference source for anyone involved in the payments ecosystem.
Arvato (part of Bertelsmann) is an expert in Business Process Management; could you elaborate on its service offering for payments and ecommerce domains?
Because we know that every business is different, we have designed our global partner solutions to be fully agnostic. Through our global acquiring network, we manage multiple currencies and support all local and international payment methods via various partners. Arvato focuses on an agnostic partner management approach, as the number of required partners in the ecommerce business is growing tremendously, leading to increased levels of complexity.
In order to support our clients, we research the most suitable partners for their markets and individual needs. Additionally, we can manage the request for proposal (RFP) process where necessary. Furthermore, our agnostic approach provides the full orchestration of layer and partner implementation from contracting and on-boarding to delivery. We are the Single Point of Contact for our clients.
What are the key payment fraud challenges for online retailers selling internationally?
There are many challenges for merchants in combatting fraud – fraudsters are becoming even more inventive and sophisticated with activities ranging from phishing/pharming to account takeover. Card-not-present fraud is escalating and is expected to outpace ecommerce growth, leaving many businesses unprepared and with outdated technology.
One of the main challenges that we see underserved in the market is order review. The last line of defence against fraud, order reviews verify the authenticity of a customer. Typically, lower-risk transactions are accepted automatically and higher-risk transactions are declined automatically as part of the control process which is managed by algorithmic or rules-based fraud control tools embedded in the shopping experience. The transactions in between will be processed by manual order review. However, an insufficient order review solution can lead to „false positives” and, potentially, to a higher chargeback rate, which will entail penalties and higher costs.
Artificial intelligence (AI) and machine learning (ML) are helping organisations combat fraud in ways that were unattainable in the past. Does this make the manual review process obsolete?
Arvato focuses heavily on automation, AI, and ML. For order review, we have created a highly automated solution that eliminates more than half of the manual effort typically required. The use of robotics enables automated research, which reduces average handling time by performing the standard process’ steps befor an analyst opens the order record. In addition to efficiency, the automated research also ensures compliance by executing all the required checks and documenting the research steps and results in one single standard notation format.
However, while we can do a lot with robotics, human decisionmaking skills are still required. Therefore, our aim is to create a best-in-class solution with the right mix of technology and people, supported by process expertise.
What is the percentage of transactions that still go through a manual process and how does this differ per vertical or country?
Approaches to manual order review range from merchants who do not have sufficient resources to review any transaction to luxury merchants who review 100% of the transactions.
The percentage of transactions manually screened varies by country – for example, most of the orders place in Latin America will be reviewed manually, while in Europe and the US the number is far lower. On average, more than 10% of online orders require manual review and, therefore, it is an essential process for enterprises looking to control fraud and minimise the risk of declining genuine transactions.
What should be taken into account when deciding which components of fraud management should be kept in house and which outsourced?
Just 14% of manual order reviews are currently outsourced, but with 1.2 billion ecommerce orders placed each year, enterprises are hamstrung by the burden of allocating employees to review them manually. The process is not as straightforward as simply assigning the task and researching it. Moreover, the process is resource intensive, difficult to scale for seasonal peaks and troughs, and will potentially shift the focus away from the business’s core activity.
A partnership with an outsourcing provider enables you to access best-in-class people, processes and technology, allowing you to focus on what matters to you. Arvato‘s Profit Protection solution allows clients to outsource a high-risk, complex task that is not a core component of their business and often has a detrimental impact on a merchant’s bottom line, to a specialised partner.
Our local knowledge and global reach means we are better placed to manage order reviews successfully, control losses, lessen risk and, most importantly, protect your profit. And thanks to the potential for quicker sales cycles, our solution will give merchants a competitive edge in this increasingly saturated market.
About Jan Florian Richard
Jan Florian Richard is Director, Global Payment Solutions, at Arvato Financial Solutions. Jan has been with Arvato since 2008 and has many years of experience in global payments, consulting for tier-one retailers within payments, and fraud prevention.
About Arvato
Arvato Financial Solutions is a global financial service provider and part of Bertelsmann SE & Co. KGaA as a subsidiary of Arvato. The company has over 10,000 employees in 22 countries, including a strong presence in Europe, America and Asia, and offers flexible full-service solutions for the efficient, international management of customer relationships and cash flows.
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