Why Online Retailers Must Become The Chief Data Experts Of Their Business
Tehani Legeay, General Manager of Identity and Fraud at Equifax, describes this data embrace as “becoming the chief data experts of your business”. Understanding how to harness the power of data is good for business and essential for the safe growth of Australia’s digital economy. Indeed, McKinsey1 estimates that 90% of the market capitalisation gains in retail during the pandemic were from the 25 highest-performing retailers, most of which are data-savvy leaders.
Customer journeys are increasingly complex
With IBISWorld2 reporting an online shopping growth rate of around 20.2% per annum and total revenue of $52.7bn in 2022, this explosive growth is a testament to changing consumer habits.
In this omnichannel world, the customer journey is becoming increasingly intricate. Numerous touchpoints create a winding path rather than a linear one, from prospecting to purchasing and ongoing customer service. Consumers frequently move back and forth during their unique journey as they research and select items. They have multiple options at every turn, such as contactless payment technologies like mobile apps, payment readers, text-to-pay, bill-to-mobile and mobile wallets.
“We know that consumers have very high expectations of the online experience,” says Legeay. “And a great experience encompasses every single touchpoint throughout the consumer journey.” These complex journeys call for a nuanced approach to provide a seamless and personalised experience, but this presents a significant challenge - the rise of sophisticated fraudsters.
Fraudsters are exploiting all breakpoints in the journey
Combining a complex digital world, a sizeably growing marketplace and sophisticated consumer journeys has created an environment ripe with criminal opportunity. The 2023 Australian Payment Fraud Report revealed that fraud on payment cards rose by 16.5% to $577 million in 2022, card-not-present fraud increased by 14.4%, counterfeit/skimming rose by 30% and lost/stolen card fraud surged by 44.5%. Criminals are investing in their trade and improving rapidly, using data and technology to get better at what they do with astounding speed. Legeay describes it as a ‘criminal game changer’ and explains, “more capital has been made available to organised crime over the course of two years than has been invested in anti-fraud technology in the last decade.”
These advancements have translated into more sophisticated attacks, including an exponential rise in scams. “The attacks are better, more automated and targeted - it’s a real challenge for retailers,” says Legeay.
While previously fraud was concentrated at the point of payment, fraudsters know that there are many breakpoints in the customer journey, both offline and online, and they attack on all fronts to maximise their chances of seizing funds. Fraudulent activity can begin the moment they visit your website or app and continue through account setup and post-authorisation stages with chargebacks and friendly fraud.
They also capitalise on the different systems and processes businesses create around various steps in the customer journey. These include the CRM you may have implemented to manage prospects through the purchase funnel, the fulfilment process to handle once-off and returning orders, and customer service to respond to post-sale queries.
“We are seeing a significant increase in the combination of account takeover fraud with fraudulent chargebacks”, reports Legeay. “These are two different touchpoints in the consumer journey linked through fraud.”
Legeay also reports that post-payment disputes and refunds - deliberate first-party fraud or friendly fraud - have grown so much that they now rival third-party fraud.
Data can help you get the friction right
For online retailers slow to embrace data for decision-making support, fraud can impact on many fronts, including the loss of data through breaches, the illegal transfer of rewards points/ gift cards, fraudulent purchases leading to chargebacks, manual handling expenses and reputational risk.
Legeay emphasises the importance of a data-driven approach, stating that with access to data about your prospects and returning customers, making smart business decisions becomes easier. “Seeing granular signals such as IP address, email risk and geolocation, early in the consumer journey, can help retailers provide a personalised and friction-right experience.”
Understanding the right amount of friction for each consumer and touchpoint is vital to achieving the right balance between security and a seamless shopping experience. Fast, easy, smooth and personalised is the kind of experience shoppers have come to see as nearly as important as the products or services they buy. Data can be used to design and automate appropriate systems and processes to address the unique risks at different stages of the customer journey. For example, the risks at account opening vary from the risks related to payment fraud.
“Putting data to work in your business absolutely empowers online retailers to grow safely”, says Legeay. She gives the example of a leisure and entertainment client who was able to reduce their chargebacks while increasing their revenue by optimising their decisioning rules based on transaction data. Another client from the same sector was able to use peer benchmarking to set a goal for chargebacks and worked towards achieving it in two months.
She recommends the following strategies for retailers looking across their customer journey for ways to improve online conversions and operational efficiencies while managing risk:
- Seek a global and holistic view of your consumers that you can track throughout their iterative journeys with you over time.
- Tailor your checks and balances to each consumer touchpoint in line with your consumer profiles, the journey stage, and the risk associated with your products and services.
- Use AI and machine learning to continuously optimise your decisions over time.
Becoming a chief data expert
In a world brimming with data, becoming the chief data expert of your online retail business is not only a smart move but an essential one. It is time for online retailers to harness the power of data, strike the right balance, and ensure the future of online retail is one of growth, profitability, and security.
And what a bright future awaits. Online retail will continue to play a pivotal role in our digital economy as the federal government aims to progress Australia to a top 10 digital economy and society by 2030.
By leveraging data analytics technology, you can minimise risk, reduce costs, delight customers, and take your business to new heights. Equifax's trusted identity and fraud solutions can assist you in verifying consumer identities, assessing risks, and conducting business securely — while achieving a better customer experience. Detecting account takeover schemes, fraudulent transactions, and potential fraud later in the customer lifecycle is part of our comprehensive data-driven solutions.
Contact Equifax today to explore our comprehensive fraud and identity solutions.
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