There are many reasons customers initiate chargebacks. Sometimes they experience legitimate fraud and sometimes they’re engaging in not-so-friendly fraud. It’s also true that a high chargeback rate is the result of customer frustration at your policies and procedures.

Even if your business is below the threshold for an Excessive Chargeback Program, chargebacks are costly. Indeed, they cost your business more money than a simple refund does. When your customers turn to their banks to initiate chargebacks:

• You have to pay a fee when a chargeback is initiated against you
• You have to pay an additional fee if you decide to dispute the chargeback and try to save the revenue from the transaction.
• The more chargebacks initiated against your business, the higher those fees will become
• You may still lose the revenue from the sale
• Your employees spend time and effort fighting the chargeback
• Enough customers can complain about your product or customer experience online and tarnish your online reputation

How to Reduce Chargeback Rates

There are several tactics that have a significant impact on reducing chargebacks lowering costs to your business.

Define, Monitor and Improve KPIs

When your revenue depends on processing millions of card-not-present transactions every year, a minute amount of chargebacks is inevitable. But is your current rate normal or heading toward trouble?

You first need to find out what your chargeback rate is and define what an acceptable chargeback rate is. Once you’ve decided that, your task is to set your baseline and improve it. It is important to do this sooner rather than later because once you are at a dangerous threshold it is too late. Whatever changes you make could take months to have an impact on your chargeback rate. That’s why you need a dedicated resource that monitors your chargeback rate along with a mechanism for sounding the alarm when your chargeback rate starts climbing too high.

Review and Revise Your Refund Policy

An unclear refund policy or a cumbersome process for obtaining refunds is often the cause of more chargebacks. To combat these types of chargebacks, ensure that your refund policy is fair to your business and fair to your customers. Our recommendation is to offer 30-60 day money back guarantee. (Note: this recommendation is primarily directed at B2C companies with high transaction volumes. B2B companies have other concerns when defining a refund policy. But whether you decide on unlimited refunds or absolutely no returns allowed whatsoever, the main thing is to be transparent and consistent with the policy you promote.) There is a possibility that this type of liberal refund policy may cause a surge in refund requests, but more often than not, your customers are reasonable people acting in good faith. They are not trying to scam you. They tried, they bought and for whatever reason, they are not satisfied. Implementing a stricter return policy is far more costly if it results in customer frustration.

It’s also important to keep in mind that the card associations allow customers to initiate chargebacks well after most companies allow no questions asked refunds. Even if you offer a generous 60 day money back guarantee, card associations will accept chargebacks up to 120 days.

Whatever you decide, your policy has to be clear to buyers before, during and after they complete their purchase, and your internal policies must align exactly with the external policy you promote to the market. The main thing is to not advertise one policy but practice another. If you say no questions asked, then don’t ask any questions.

Communicate clearly

Once you revise your refund policy, you have to ensure that customers receive accurate, timely and relevant summaries of their transaction/subscription agreement immediately before AND after the order is completed. In the case of subscriptions, make sure that the customer understands when their subscription is going to be renewed well in advance of the next billing event.

Your least savvy user must be able to understand and take action on everything involved from sign-up to renewal. Everything in this case includes terms and conditions, payment information, next billing dates, refund options, login, access and activation information, options to upgrade or downgrade plans, an ability to add or remove license seats, an ability to easily cancel future renewals, etc.

And don’t forget to localize your content for your global customers.

Develop a Highly Trained Customer Service Staff

Minimizing fraudulent transactions and fighting friendly fraud is critical to reducing chargebacks and saving money. The more fraud you prevent from going through your system, the fewer resources you spend managing the fallout from it. A system that effectively eliminates high volumes of manual review combined with expert agents with the knowledge and experience to accept or decline risky transactions will save you money in the long run.

As we mentioned above, you probably have certain segments of your customers who feel frustrated: their payment information has been stolen; they do not recognize a charge on their monthly statement; or they require tech support but have not received a response from your tech support team.

The frustration these customers experience causes them to seek out a refund. Quick and effective resolutions by highly trained customer service agents can not only prevent chargebacks — they can also prevent refunds. In fact, these types of interactions can turn a frustrated customer into a highly satisfied customer who write glowing reviews of your business.

The added benefit of a highly trained Customer Service team is that they become your front line for discovering and solving recurring issues.

Keystone

Chargebacks often occur when your customers don’t trust you to resolve their problem. To effectively prevent chargebacks, you need to first define a KPI that you can measure and influence, implement a fair and reasonable refund policy, clearly communicate pertinent information about your customers’ initial transactions and renewals, and train your staff to resolve any issues that come their way.

Alyse Serritella, Adrienne Pollitz, Anthony Paliferro, Eric Harrington and Steve Knipschild all contributed to this blog post.

Click here for more insight into the hidden costs of your digital business.

The post Four Proactive Tips to Reduce Chargeback Rates appeared first on cleverbridge.

Account Takeovers

A key part of subscription management is the user account. This is where subscribers directly manage their subscription plans. They can update payment and contact information, upgrade or downgrade plans, contact customer support or make additional one-off purchases. Unfortunately, the convenience and personalized approach of an individual subscriber account is threatened by increasing instances of account takeovers.

According to industry experts, to minimize the threat from account takeovers, businesses must identify high-risk users during account creation, flag suspicious account changes, and monitor suspicious purchasing behavior.

For example, to minimize the risk during account creation, make sure that you have implemented a two-step verification process. This makes it more difficult for fraudsters because it means they must have access to both the email and customer account.

However, a two-step verification process doesn’t solve all your problems. What if the fraudster has access to both accounts? That’s why it’s also important to look for suspicious account changes. For example, did the customer change their email address? Was a password reset page accessed from an unfamiliar IP address? These are things that by themselves can be considered harmless, but when combined, they start to form a suspicious pattern of behavior.

Ordering patterns can also indicate fraudulent activity. If your business model involves usage based billing, what does it mean when someone with lower usage suddenly becomes a super user? When a customer usually purchases below a certain price threshold, but suddenly is purchasing big-ticket items, or when they suddenly go on a spree buying lots of lower-ticket items, you might have a fraudster on your hands.

Identifying Fraud Through Behavioral Biometrics

Of course, you have to watch out for fraud in other places besides the account section. Fraudsters are also looking to exploit areas like the shopping cart, and you have to be able to identify behaviors that indicate when you are at risk. Behavioral biometrics refers to the observation and tracking of customer shopping cart behavior while making a purchase. Important behaviors to watch out for include:

Typing speed

Here the Goldilocks rule applies — not too fast, not too slow, but just right. If you observe typing that is too fast, it could be a fraudster using a malicious bot to place orders. Typing that seems too slow suggests the user may be unfamiliar with the data they’re trying to use.

Right-handed or left-handed

Is this trait consistent across multiple orders? If a user typically indicates a preference for their right hand, but all of a sudden you see indications of a left-handed typist, you may be seeing a fraudster.

Typos

Computers and humans make different sorts of typos. Malicious bots are programmed to take huge amounts of stolen personal data and try to complete orders online. But as these bots copy and paste stolen data, they wouldn’t recognize whether they’re in the correct field or not. So, for example, a bot might try putting payment information into the email address field.

Legitimate customers make more logical mistakes, like misspell the domain name of their email address and then they press backspace to correct the typo.

Typing rhythm

Legitimate customers generally have a natural rhythm to their typing. For instance, when customers type their phone numbers, they usually pause between the number sets. For a U.S. customer, the pattern might look like this: ### (pause) ### (pause) ####.

Similarly for a credit card number, which is usually presented in four sets of four digits, a legitimate customer is likely to type the numbers in blocks of four just as it appears on the card.

Keystone

In a straight forward transaction, or in a typical renewal of a subscription, your customer authorizes banks to transfer their money to you. But sometimes the data is deceiving. Sometimes the data makes it look like a legitimate customer is renewing their subscription, when in fact, that customer is not who they say they are.

Businesses need to reduce the security risks and costs associated with fraudsters exploiting sensitive customer information. Protecting customer accounts, and monitoring behavioral biometrics all have very real effects on your bottom line. Make sure your business is protected by trained individuals armed with the latest in fraud prevention tools and techniques.

Alyse Serritella is the Fraud Prevention Team Leader at cleverbridge.

Adrienne Pollitz and Truc Nguyen contributed to this article.

Further reading

• NuData Security Reveals Recent Online Fraud Trends in Wake of Significant Breaches
• Follow the Data: Dissecting Data Breaches and Debunking the Myths
• Anatomy Of An Account Takeover Attack

The post Protecting Your Customers From Account Takeovers appeared first on cleverbridge.

Subscription Commerce Guides

We wanted to highlight three important subscription commerce guides we published in 2015. The first gives you a peek into the subscription commerce solutions landscape, while the second discusses the subscriber’s journey and its attendant KPIs.

Navigating the Subscription Solutions Landscape

What kinds of subscription billing platforms exist? What are the best ways for your company to establish a subscription model for your products or services? Let our guide orient you to the ever evolving subscription market in our complimentary Navigating the Subscription Solutions Landscape White Paper.

Mapping and Measuring the Subscriber Journey

Once you’ve implemented a subscription solution, how do you measure success? Are you thinking about your customers’ experiences? Seeing the subscriber journey through their eyes is the best way to begin building a profitable relationship with them. Download our complimentary guide, Mapping and Measuring the Subscriber Journey, to be sure you understand all the stages of the subscriber journey and subscription KPIs.

Attracting and Acquiring New Subscribers

Our third guide, Attracting and Acquiring New Subscribers, addresses a major challenge faced by all subscription businesses. This guide takes you through the basics of attracting new visitors to your website, acquiring free trial and freemium users, and converting free users to paying subscribers.

Popular 2015 Ecommerce Blog Posts

Customer Experience

Your customers’ experiences with your website, your service and with your customer support team are all opportunities for your business to increase customers satisfaction. Positive customer interactions burnish your brand and increase customers’ confidence in your ability to deliver on your promises. Three posts on this topic were very popular in 2015. They explore ways to improve your user experience, specific KPIs to reduce your customer contact rate, and confirmation pages that leave your customers satisfied.

• Fifteen Effortless Ways to Improve User Experience
• Customer Service KPIs: Reducing Contact Rates
• World Class Customer Service — Enhancing Your Confirmation Page

Popular Ecommerce Tips

Earning online revenue has become more complex than simply maintaining an online store (traditional ecommerce), so it’s no surprise that blog posts explaining the ins and outs of maximizing your online store continued to rank high with readers in 2015. Below are three important tips about encouraging timely payments by customers, maintaining an ecommerce site with effective features, and navigating Google policies that can potentially kill your business.

• Are Your Customers Missing Payments?
• Five Features of Effective Ecommerce Sites
• Beware Badware: Google’s Policy on Unwanted Software

Legal Compliance and Fraud Prevention

Source: GIPHY

Common challenges surrounding credit card processing were also top of mind among ecommerce professionals. A popular post from June challenges the idea of friendly fraud. Tim Russo points out that the concept is not friendly at all and increases costs for all parties involved in credit card processing.

In addition to friendly fraud, retailers also take on considerable risks just taking credit card information from customers. Are the basic compliance standards enough? Should your operation consider PCI certification? What other measures can your team take to ensure you not only meet the minimum standards, but exceed them?

• Friendly Fraud Is a Lie
• Data Security: Why PCI DSS Alone Doesn’t Cut It

Ecommerce Eye Candy

Our weekly Ecommerce Eye Candy series also made it into the most popular posts. This one from March of 2015 explores the state of the Indian Ecommerce Market, its exponential growth and largely untapped potential.

No matter which market customers were in, though, retailers had to become more savvy in their metrics to accurately gauge Customer Acquisition Vs. Retention Costs. Careful measuring of your costs per customer acquisition compared to your customer retention costs help focus your customer communication efforts to increase revenue and reduce costs.

Check out all our Ecommerce Infographics.

“Don’t protect your cash cow if there’s a risk of being disrupted. You may as well disrupt yourself before somebody else does it to you.” — Craig Vodnik

Meanwhile, on the Internet

2015 was also an amazing year for cleverbridge across the Internet. What follows is a selection of popular articles and interviews that appeared here and there over the year.

This very blog was featured by Digital Marketer in their list of the Eight Best Conversion Rate Optimization Blogs. Experts at cleverbridge were also important contributors to other publications, including these two gems from CIO and CreditCards.com.

• CIO | 7 simple, low-cost ways to acquire new customers
• CreditCards.com | 8 steps to fighting chargeback fraud

cleverbridge co-founder Craig Vodnik was very busy this year. He was featured on the 2X Ecommerce Podcast in April of 2015, discussing the current state of subscription commerce, and he penned How to Select the Right Subscription Commerce Solution for Website Magazine. You can also watch him featured on Bootstrapping In America over at tastytrade.

Finally, The Paypers featured an interview with cleverbridge co-founder and CEO, Christian Blume: Subscription commerce is about understanding the customer life cycle value.

Keystone

Join us in raising a glass to the year that was, and have a happy New Year!

Start 2016 off right by downloading our Six Guides on Ecommerce Essentials today. 

The post 2015 Year in Review appeared first on cleverbridge.

New Opportunity

Traditionally, the C-suite has viewed software piracy as an unsolvable problem and has accepted it as a cost of doing business similar to “shrinkage” in retail businesses. In fact, software piracy can be a significant source of revenue once you are able to reach, educate and convert these “unpaid users.”

You may think that pirates will never pay for software and are not worth pursuing, but you are only partly right. Research from Microsoft and Adobe has identified three different types of pirate users and their behaviors may surprise you:

1. “Pirate-inclined” users think all software should be free and are highly unlikely to pay, so it doesn’t make sense to focus conversion efforts on this segment.
2. “Opportunistic” pirates are bargain hunters looking for the best deal and are willing to take some chances with less well-known online stores, leading them to unknowingly buy pirated software.
3. “Legally-inclined” pirates have no idea they are using pirated software – they may work for a large company that has installed more licenses than they’re entitled to or they could be a home user who gets their software from a “helpful” friend or relative.

The good news is that opportunistic and legally-inclined pirates are unintentionally using pirated software. Based on research conducted by Microsoft, Adobe and Disney (and V.i. Labs’ experience converting unpaid use globally), 83 percent of all pirates in mature markets are opportunistic and legally-inclined and will pay for software.

Reach

So how do you identify these pirate users? Adding software intelligence capabilities to your applications provides a steady stream of data and insight into who is using your applications and how they are using it. Vendors with piracy detection capabilities can use this intelligence to drive programs to convert these well-intentioned victims of piracy into paying customers. Once they have identified these pirate victims, they can target them for conversion campaigns through in-application messaging.

Educate

In-application messaging is an essential tool to convert, nurture and retain customers. But in this context, it is important to recognize that these users likely do not view themselves as pirates and should be addressed using a customer focused tone. Leading off with a statement that “you may be the victim of piracy” or “your copy of this product may not be genuine” can go a long way to building a positive, long-term customer relationship. Each message should include a call-to-action link that directs the user to the vendor’s website where they can learn more about their status and purchase a license. Adobe does a great job tying together the in-application message with education on its site:

It is important to establish trust with the user at the point when they are informed that their software may not be genuine, and then make it easy to resolve the matter.

Vendors should also trigger in-application messaging based on geography, frequency of application usage, types of functions used, and other factors to better tailor their messaging to different user segments. For example, if usage data indicates elevated piracy rates in Eastern Europe, vendors can develop a regional communications messaging plan with localized content for unpaid licenses for that segment of users.

Additionally, vendors should create a communication escalation plan (similar to an email nurturing campaign) if conversion does not occur after the first message. Drive the user to conversion through logical steps that add urgency with each step, and customize the timing of the escalation based on the usage data. Track behavior and assess trends that indicate high use to reinforce the value of a paid license in subsequent messaging. The goal is to drive the user to the vendor’s website where they can purchase a license and become a customer.

Convert

Once the user is on your website, you can fully leverage your investment and expertise in digital marketing.

You might not realize it, but your marketing team has likely already established a sound foundation for converting pirates. Leveraging your pre-existing investment in digital marketing and the teams’ expertise with trial conversion techniques is the basis for a cost-effective piracy conversion initiative.

Think of opportunistic and legally-inclined pirates as highly qualified sales leads and a new segment of prospects. They are already using your software and are deriving value from it. By customizing your trial conversion messaging, your marketers can establish a conversation with the pirate that explains the value of a paid license. From there, they can use A/B testing techniques to experiment on the best approach to convert these prospects to paying customers yielding a ROI with revenue growth.

Keystone

There is an old expression that, “when life gives you lemons, make lemonade.” In other words, take something sour and make it sweet. Most software vendors already have the main ingredients – software piracy and an investment in digital marketing – to not only make lemonade, but to sell it. The other ingredient – software intelligence – is easily added to their applications. Given the constant demand to grow revenue and expand addressable markets, software vendors can easily leverage existing investments and conditions to convert pirates to paying customers.

Michael Goff is Director of Marketing for V.i. Labs. Mike Schramm is the founder of Michael Schramm Consulting – Global eCommerce Channel Strategy. You can read about their recent collaboration here. To learn more about combating software piracy, be sure to download their new playbook, Making Software Pirates Pay. 

The post Software Pirates — Your Most Qualified Sales Leads appeared first on cleverbridge.

To learn more about increasing revenue and reducing risk in the global marketplace, download our Six Guides on Ecommerce Essentials today.

EMV Chip Card Implementation

Feud Heats Up Over Chip Cards, FBI Warning | Computerworld

As we noted earlier in the month, new EMV Chip Cards are now in consumers hands, with implications for brick-and-mortar and online merchants alike. The security feature devised in Europe is meant to reduce the risk of fraudulent card transactions. The EMV cards generate a unique code associated with each transaction and are designed to work with a PIN. Whether or not to require consumers to use a PIN with their new cards has been causing some friction between banks and retailers, as detailed in this article from Computerworld.

The crux of the disagreement centers on how retailers and card issuers balance security and convenience. “The banks and card companies have come out against PINs in the U.S., saying that other technologies, such as encryption and tokenization, along with using a microchip-embedded card with signatures, would be more effective in fighting fraud than PINs. Retailers favor PINs, arguing that PINs will reduce fraud not only for lost and stolen chip cards, but also for online and telephone transactions.”

The difference between the two industries came to the fore over their disagreement with an FBI advisory statement about how to use the cards. Their original message contained several references to PINs, angering card issuers. The FBI quickly revised their statement.

Singles Day

What It’s Like To Watch Alibaba’s Singles Day Spectacle | Fortune Magazine

As American and other Western retailers dive headlong into the Black Friday and Cyber Monday kickoff to the holiday shopping season, we are weeks behind China and their instant holiday, Singles Day. The big player behind making Singles Day into an ecommerce phenomenon is Alibaba, headed by their eccentric and intriguing chairman, Jack Ma. While not every CEO may wish to emulate his style, Ma’s uncanny ability to raise revenue makes him a global role model.

When he wasn’t being interviewed by the President of the United States of America at the Asia Pacific Economic Cooperation summit in Manila, Ma could be found at Alibaba’s extravagant Singles Day Gala. Fortune Magazine sent reporter Scott Cendrowski to experience the day, which he describes as feeling, “similar to China’s campy Spring festival program, which commands higher ratings than the Super Bowl, but with a more commercial feel.”  The night included performances by none other than Adam Lambert, game show style contests between Chinese celebrities dressed in red or black, and a New Years Eve style countdown to midnight: the start of Singles Day.

Over the next few hours, it became clear that Alibaba won too, smashing previous sales and analyst predictions. As Cendrowski notes, “A communications person from Alibaba’s Alipay affiliate explains that in the first minute of selling, the payment system handled 85,900 transactions per second. Alipay was hoping to break Mastercard’s previous record of 60,000 transactions a second. Singles Day is shaping up to be the record day Alibaba hoped.”

By the end of Singles Day, Alibaba boasted $14.32 billion in sales in one day. The scale of business is a bit mind numbing. Econsultancy shares these 10 eye-watering stats, including the fact that “71% of Alibaba’s Singles Day sales came from mobile devices.”

If done right, there is no reason why Singles Day need remain solely a Chinese affair. eMarketer interviewed  Melissa O’Malley, director of global merchant and cross-border trade initiatives at PayPal, to explore opportunities and best practices for cross-border ecommerce with China. She admits that, “When I started at PayPal 18 months ago, nobody had heard of Singles’ Day.” The rapid rise of the holiday and its ecommerce trappings may inspire companies to try to get into the game, but O’Malley cautions reminds retailers how peculiar online marketing is in China. “Understanding the dynamics of the Chinese social media landscape is very important. It is so different from what Western retailers are used to doing. It’s just night and day. There’s no YouTube. You can’t just buy everything on Pinterest.”

Global Compliance

Life After Death (of Safe Harbor) – EU Data Protection in the Wake of Schrems | Cyber Law Monitor

Any business with operations, customers or data within the European Union or European Economic Area is grappling with the fallout from the European Court of Justice’s recent ruling that effectively ended the US-EU Safe Harbor agreement. In short, Safe Harbor was a framework agreement that allowed US companies to comply with customer data protection laws in the EU. Owing to recent government surveillance scandals in the US, the ECJ ruled in the Schrems case that Safe Harbor was not sufficient to protect EU citizens’ data. This change may expose companies to major compliance risks with hefty penalties.

The post above from Cyber Law Monitor examines temporary recommendations from the European Commission, which “offers alternative methods for compliance with EU data protection laws, while also highlighting the efforts the Commission is taking to develop a renewed and sound framework for personal data transfer to the U.S.”

Moving froward, no business has a clear idea yet of how the future of trans-border data will work. BNA shares this interview with expert James H. Koenig, who was a panelist on a recent Bloomberg Law webinar on the demise of the Safe Harbor Program. He recommended a keep calm and carry on approach.

“Despite the uncertainty, all companies are doing something on a risk basis in light of the ECJ’s decision. Some are moving ahead to devise a global solution without awaiting or depending on the promised Safe Harbor 2.0. Others are taking interim measures. The appropriate approach varies, depending on the type of company and the sensitivity of the data at issue.”

Keeping up with constantly changing rules and regulations can be a drain on a company’s resources, but the risks of non-compliance are high. UK authorities recently slapped publisher Trinity Mirror with a fine totaling over £70,000 for a VAT payment that was sent only one day late.

This decision could be a sign that regulators are taking a closer look at businesses, and expert Meera Rajah says, “It is really important that businesses recognize and understand the potential impact of either late submission or late payment…To avoid such a mishap, it is imperative that you understand the solutions available and keep on top of your VAT returns.”

To learn more about increasing revenue and reducing risk in the global marketplace, download our Six Guides on Ecommerce Essentials today.

The post November Ecommerce Digest appeared first on cleverbridge.

In the age of subscriptions and the emerging IoT sphere, your customer data is becoming more varied and complex. You are no longer simply maintaining a sales ledger. Customers are sharing preferences, areas of interest, and vast quantities of data generated from the use of your company’s services. Even moderately sized businesses can find the amount and complexity of their customer data driving them to seek outsourced solutions. The largest companies can afford to go the extra mile in-house.

This fascinating infographic comes by way of Hostwinds and was produced in the wake of the 2013 PRISM NSA data collection scandal and examines how major players in the game of big data are keeping it secure. These observations are still relevant today, especially for any business that deals in data. They looked at Google, Facebook and the NSA and the scale of their data center operations. Hostwinds also explores Bonhoff’s Pionen Data Center, located in Stockholm, Sweden — or rather, under Stockholm, Sweden.

Got your data security handled but want to be sure you’re ready to go global? Download our study of Eight Critical Capabilities for Global Ecommerce.

The post Ecommerce Eye Candy — Is Your Data Secure? [Infographic] appeared first on cleverbridge.

This is great news for brick-and-mortar retailers. EMV chip cards come equipped with a security chip, or smart chip, that must be scanned and authorized with each transaction. The chip interacts with the merchant’s point-of-sale device to make sure the payment card, combined with a PIN or signature, is valid and belongs to the person using the card.

As of October 1, 2015, businesses that do not accept EMV-enabled card transactions are liable for any counterfeit or fraudulent transactions.

This infographic from BluePay provides an overview of how the process works for physical stores.

But what does this mean for online merchants? As we discussed last February, this shift to more secure card-present transactions will have an impact on ecommerce sites. As fraudsters are hindered at brick-and-mortar stores, they will turn their attentions to card-not-present (CNP) transactions online.

During the first 10 years of its transition to EMV chip card technology, the UK saw online fraud increase almost 40 percent.

“Well, if fraud from card-present situations is harder to commit, we can safely assume that fraudsters will move to the online and mobile payment space and try to figure out where there are holes to exploit,” says Tim Russo, Fraud Prevention Team Leader at cleverbridge. “Be as prepared and proactive as possible,” Russo says. “This change is ultimately for the best.”

Leave a comment below about how the shift to EMV cards affects your business, and read more about the value of fraud prevention here.

The post Ecommerce Eye Candy — EMV Chip Cards [Infographic] appeared first on cleverbridge.

For the September Ecommerce Digest, we’re going to dig into localization, Klarna’s debut in the U.S., the role of shopping carts in subscription commerce, omnichannel shopping challenges, and the impact of chip-and-PIN cards on ecommerce fraud prevention.

Global Ecommerce and Localization

Website Localization Must-Haves For Global Ecommerce | Forrester Research

In this blog post from Forrester Research, Lily Varon writes about what you need to succeed in global ecommerce. This is a topic that is dear to us, and we are happy to see a report detailing global expansion issues like domain names, global gateways, global user interfaces, language elements on a web page, multilingual SEO, customer support best practices, and localized currencies and payment methods.

Alternative Payment Methods

Klarna Launches in the U.S. | Re/code
Speaking of localization … payments! Klarna is a popular payment provider for online Swedish shoppers. Klarna is a compelling payment option because it assumes all the risks of fraud instead of the merchant. If you are looking to gain customers in Sweden, one of the best things you can do is add Klarna to your checkout process. But now Klarna is looking to expand its operations into the U.S. Which merchants will start offering this type of payment for customers outside of Sweden? Will it make a significant impact on conversion rates? It will be interesting to see if Klarna’s attempt at global expansion will disrupt the ecommerce market.

Shopping Carts and Subscription Commerce

Why the Shopping Basket Is the Next Big Thing in Digital Commerce | Demandware
This blog post from Demandware advocates that merchants should “persist that basket,” that is, they should not neglect the great power of the online shopping cart to drive sales and retarget bouncing visitors. We do not disagree that the cart is a crucial element of ecommerce success. But just as conversion rates are less relevant in today’s subscription dominated market, so is a narrow focus on shopping carts. The real question is, “How are you messaging customers before and after they create a cart?” Today’s subscription dominated market demands attention to the entire customer lifecycle — not just the cart.

Content Marketing

Primer by Google Is Here to Make You a Better Marketer | NewsCred
Looking to learn more about marketing automation or creating relevant search ads? This interview with Hope Friedland, Content Lead at Primer, showcases a new educational app from Google. It is a handy library of content that helps people learn the ins and outs of digital marketing. It is designed to be consumed by mobile device users on the go, and it is highly interactive. Aside from the educational content, this app also serves as a source of inspiration to marketers thinking about alternative ways of educating their audiences and communicating brand value.

Omnichannel Shopping

MasterCard Busts Myths of the Omnichannel Consumer | PYMNTS
We love the image offered in this post of today’s digital shopper as “a patient, skilled, value-seeking missile.” Based on MasterCard’s The Retail CMO’s Guide to the Omnishopper, PYMNTS explains that customers research their purchases piecemeal: over time, in both physical and online spaces. Even in the digital world, they search across different devices and through different channels. The main point here is to consider where your customers are viewing your messages, and to make sure those messages are consistent.

Fraud Prevention

How Chip-and-PIN Credit Cards Protect Consumers From Fraud | NPR
This interview with security expert Brian Krebs discusses the  impact of this switch and notes the difference in the European and American cultures of using credit cards at physical stores. Many countries adopted chip-and-PIN credit cards a while back, and the U.S. is slowly catching up on this important security improvement. However, as we explained a year and a half ago, blocking one avenue of fraud is sure to send the fraudsters looking for another way to steal your customers’ personal information and money. Krebs notes that it is not just online shopping carts that are affected by a new surge in fraud activity: New account fraud and account takeovers are going to occur too.

Please share your thoughts in the comment section below.

The post September Ecommerce Digest appeared first on cleverbridge.

It’s one thing when you’re face to face with a merchant. But when you introduce ecommerce and card-not-present (CNP) transactions into the mix, these simple life lessons get thrown out the window, and commerce becomes a technological Lord of the Flies.

According to dailyfinance.com, “Online merchants lost $11.8 billion to cases of ‘friendly fraud’ in 2012.” Friendly fraud is where a customer issues a chargeback (in some cases deliberately), claiming an item was never received or that they never made the charge. This can feel like a victimless crime, but merchants are paying the price in lost products, chargeback fees, increased chargeback rates and the ever present specter of losing their right to process credit cards.

Most writing on the subject tells you that friendly fraud is a problem and shows you how to fight these chargebacks. But I am here to state that we are fighting friendly fraud all wrong. We let consumers, issuing banks, acquirers and the card schemes off the hook for this continued consumer protection loophole. This needs to stop, and we need to take action.

Let’s start with the term friendly fraud. I believe that fraud is fraud and everything else is a valid transaction. The police don’t have a separate friendly crimes division, and neither should merchants. If we shift our perspective on what we currently classify as friendly fraud, then the conversation about the transaction changes. If a consumer forgets a purchase, doesn’t like the product, or their child buys an app—this is not fraud. These are issues that can and should be addressed, but merchants should not be repeatedly punished for consumer behavior. However, when a consumer deliberately tries to gain another product by claiming they did not receive a product—that is fraud. There is nothing friendly about an intentional and malicious attempt to steal from merchants and issuing banks.

By shifting the rhetoric, we can tackle other issues related to this myth of friendly fraud. If we assume that transactions are either valid or fraudulent, then we can address them from what I classify as behaviors.

Merchant Behavior

Do you have a reasonable refund policy? Does your physical product match the description or pictures on your website? What is your digital or physical fulfillment time? Do you have a parent company and the descriptor on the credit card statement differs from your web store? Are you Comcast and you have a known history of poor customer service?

Now, I do not want to shift blame from those merchants with unscrupulous behaviors including misleading refund policies, impossible to reach customer service, poor service resolution and a history of bait and switch business practices. Chargeback rights were made to protect consumers from stubborn and deceptive merchants. Chargebacks related to disingenuous merchant behaviors address valid complaints from consumers.

To fix these issues, all you need to do is look at industry best practices and make adjustments to your current business model. And if you refuse to make these changes, chargebacks (and their consequences) should be placed at your front door.

However, if you are a good merchant with fair, trustworthy and transparent policies, you will still be hit with the same chargebacks as your duplicitous brethren. Valid transactions with subsequent chargebacks need to stop being called friendly fraud. When we move away from this term, we can start to win these chargebacks because we approach them as valid transactions.

Consumer Behavior

According to Transaction World, “The large majority of cardholders (81%) stated their actual reason for initiating a chargeback was due to convenience (‘they didn’t have time to contact the merchant’).” When the average consumer is using a chargeback as a convenience method, the system is broken. Good merchants should not be penalized because a consumer didn’t have time to unlock their smart phone, call the merchant, and solve the issues themselves. There is an element of culpability that is missing from this equation.

For non-fraud consumer behavior, it is worse that a merchant is penalized. A simple call would alleviate most consumer issues, but instead the issuing banks and cardholder will file a “does not recognize” chargeback or just a straight “fraud” chargeback. And once the consumer receives the information from the merchant, they state “Oh, yeah! I did order that product.” While the merchant may receive his money back, the simple time and effort to fight the chargeback is not worth it in many cases. According to Verifi, “It’s estimated that for every $100 in chargebacks, your true cost is $308 in wasted time, expensive fees, penalties or additional losses of goods and services.”

On the flip side, when a customer looks to gain another Amazon package by stating they did not receive the original (when they assuredly did), this is fraud. There is nothing friendly about those circumstances. If a customer looks to get their money back and keep the product then it is true fraud. There is a malicious and deliberate attempt to steal from a merchant. In these chargeback cases, the burden of proof is on the merchant. However, even if a merchant wins the chargeback, the customer can still move toward arbitration and the outrageous fees associated with it. So even though the consumer is defrauding the merchant, it is the merchant who suffers.

This is like punishing the child who is bullied in school because the bully broke their hand while punching the child. There is no recompense or restitution for the merchant in these situations. In turn, this leads to the merchant offering poor customer service or a refund policy that is ineffective, and the cycle continues. And again, even in a win, the chargeback still counts against the merchant’s total chargeback rate.

All of this leads to the last behavior that needs to be addressed—industry behaviors.

Industry Behavior

For merchants and consumers to change their chargeback practices, there needs to be changes at the top. Specifically, issuing banks need to hold their cardholders accountable for their actions. There needs to be consequences for being a serial chargeback customer. Chargebacks are not refunds, and they should not be used in place of them. The penalties placed on merchants for deceptive or forgetful consumer behavior is outrageous. This is tied directly to the issuing banks who don’t want to hold their customers accountable.

Moreover, issuing banks often file chargebacks under the wrong codes (intentionally or not) or don’t ask their customers to contact merchants first. This practice need to be addressed.

Finally, there needs to be an overall shift in the relationship between credit cards and ecommerce from the rule makers. Almost two years ago, there was an industry shift in accepting compelling evidence for digital and mobile transactions—but our digital industry evolves every day with every customer.

The card schemes are trying to play catch up and there will be some changes in the near future. When a merchant supplies compelling evidence during representment, the cardholder will need to provide a detailed explanation about why they are continuing to dispute the transactions. And the issuing bank must prove they contacted the customer and reviewed the compelling evidence with them. These are excellent first steps toward winning a friendly fraud chargeback.

The Next Steps

So if we can shift the friendly fraud paradigm, and we start holding merchants, customers and the industry accountable, what are the next steps? The card schemes and issuing banks need to work together to determine liability and what that means in terms of excessive chargebacks.

Merchants should be fined and held accountable for their actions when they are at fault. But there should be recourse if it is just a customer forgetting a purchase, or not wanting to call for a refund, or if they are trying to commit chargeback fraud. And this is just the tip of the iceberg.

This will not be an easy fix and it’s not going be solved in this blog post. But our industry needs to start this conversation. We are past the point where we need to learn how to fight friendly fraud. We need to identify the root causes and shift liability where needed. The time for personal culpability starts today—only then can we make real ecommerce change happen.

Keystone

As more people purchase everything from the Internet (and they will), the need for consumer and merchant protection is imperative. Additionally, the need for merchant, consumer and industry responsibility is even greater as traditional commerce changes. If we can’t figure out a way to make this work then everyone will be a victim and the only winners will be actual fraudsters. We can either learn to live together or die alone.

Tim Russo is the Fraud Prevention Team Leader at cleverbridge

The post Friendly Fraud Is a Lie appeared first on cleverbridge.

• Is it a valid transaction if product x is over $100.00 and is placed by a first-time customer using a freemailer account?
• What happens if product y is from same vendor but costs over $900.00?
• Does it make a difference if a customer places an order for product z from Thailand or France?

In order to accept valid orders and deny fraudulent ones, a fraud prevention specialist has to keep all of these potential variables in their mind while performing manual reviews. They have to make as much revenue for vendors while providing the end user a seamless purchasing experience. The fraud prevention specialists are the line of defense between the good guys and the bad guys. Occasionally, because they are human, they will make a mistake.

But what if we could take the human variable out of the equation?

Tabitha Stang, Global Manager of Fraud at cleverbridge, has asked herself this same question over the years. After attending a presentation from a company talking about its 0 percent manual review rate using statistical techniques, Tab started to wonder if this was possible at cleverbridge and how to make it a reality. She graduated with a Master of Applied Statistics from Colorado State University and went to work solving this problem: how to create a machine that thinks like human but is superior to a human?

That presentation inspired Tab to focus on the idea of using a predictive model to reduce cleverbridge’s manual review rate to 0 percent (while still preventing fraud & keeping false positives down).  “Predicative modeling is the process of creating, testing, and validating a model to best predict the probability of an outcome,” explained Tab. “In our case, an outcome is whether an order is fraudulent or not.”

Tab is taking all the expert knowledge of her fraud prevention specialists and using that to create a model, using potential fraud variables, that will make the correct decision every time — even if it looked at millions and millions of orders. By replacing the human element, the occasional mistake is removed from the equation. Fraud prevention specialists will now get to focus on more complex fraud projects, developing the model, and creating specialization opportunities. This change empowers our team to find and fill gaps and take charge of their future.

Tab has spent most of her waking hours working on this project. She was lucky enough to find another person at cleverbridge who could be able to speed up the process – Soukaina Messaoudi, who has a Master’s Degree in Informational Quality from University of Arkansas at Little Rock.

Tab and Soukaina have spent numerous hours creating, testing and retesting various models to develop a tool that could react and screen like one of our human experts. On March 26th, Tab will present the process to industry peers and experts in Las Vegas, in a presentation titled “Using a Predictive Model to Reduce Manual Review.”

As fraudsters have evolved over the years, they learned what most fraud prevention teams are looking for on any given order. Fraudsters are smart, but we have to be to smarter. The EMV switch is going to drive fraudsters online and out of the stores. Fraud prevention tools have to be advanced today to stop the onslaught of card-not-present (CNP) fraud tomorrow.

Using a machine to accurately predict the purchasing behavior of a fraudster is one of the ways we can keep up, and hopefully, surpass their advantages. If a fraud prevention team can work proactively, instead of reactively, they can look to reduce fraud (not just manual review rates) to 0 percent for any given company. If we can predict what a fraudster is going to do before they actually do it, we will have entered the Age of Precrime. Okay, so I am not advocating for that type of Minority Report style of prevention, but using a predictive model keeps fraud prevention teams everywhere half a step behind the fraudsters, instead of the 5-20 steps behind that fraud prevention specialists often find themselves.

The human mind is amazing. Its ability to process even the most minutiae of information and make parallels and comparisons is what has driven innovation for so long. We are now nearing a fork in the road between the human mind and human technology. The human variable will never be out of the fraud prevention equation entirely, but if we can evolve the equation and utilize more technological variables, our ability to predict and prevent fraud is endless.

Keystone

The time for preventing fraud with predictive analytics has arrived. Putting in the time and effort now will have an exponential cost savings in the end — less orders reviewed, less fraud, less chargebacks and a better customer experience. The singularity has arrived, and I, for one, welcome our new technological overlords.

The post Fraud Prevention: Eliminate Manual Reviews With Predictive Analytics appeared first on cleverbridge.