Written by Aaron Begner, EMEA GM at Forter

While consumers are busy planning back-garden barbeques and summer stay-cations, the retail community is turning its thoughts to the Christmas retail season and how to make the most of millions of new online consumers. Forter’s data suggests that by the end of 2020, the number of new online shoppers had grown to 2x that of pre-COVID-19 levels. Furthermore, industry commentators predict that the peak holiday shopping season will start earlier than ever this year, so preparation time is short if retailers are to maximise growth and build customer relationships that will endure once the festive season is over.

In addition to all the creative ideas, marketing campaigns and promotions, it is important that retailers focus on creating a friction free online shopping experience that rewards legitimate customers while blocking fraudsters. With the pandemic prompting an upsurge in fraudulent activity that hurts both retailers and consumers, prioritising fraud prevention should be high on retailers’ festive preparation list to ensure they can deal with high levels of demand, and a smooth customer experience. The challenge is how to do this in a way that also helps the business thrive. Here are four key steps that retailers should take:

• Maximise return on marketing investment through new customer conversions

The pandemic prompted many customers to buy online for the first time. After making the initial leap, new users are the ideal target for promotions designed to convert browsers to shoppers and existing customers to brand loyalists.

However, they are still digital novices, and a lack of historical online profile means that traditional fraud prevention solutions often misidentify them as fraudulent when they reach the checkout. In fact, our research shows that new customers are between five and seven times more likely to be rejected than returning customers, due to a lack of data. This also has long term effects as up to 40% of these rejected customers will never come back to an online retailer that rejected them.

Even if the rejection isn’t total, the extra verification steps that most fraud prevention solutions add in produce an unacceptable level of friction, which can ultimately compromise the sale and lead to basket abandonment. We term this New User Missed Opportunity (NUMO) because, when a first-time customer is rejected, the business loses not just the immediate sale, but the lifetime value of that customer.

The missed opportunity is also a waste of the carefully planned marketing campaigns that have brought new customers to the checkout in the first place. If they are turned down when they get there, all the investment in targeted advertising and nurturing is redundant.

To overcome this risk, retailers need a fraud prevention solution that looks beyond their own limited data and aggregates customer information (based on past behavioural data) from across the merchant ecosystem. This creates a virtuous circle of trust that allows retailers to approve legitimate customers – even if they’ve never encountered them directly before. This needs to happen in real-time, with no delays to the all-important experience.

• Adopt a smart approach to account takeover prevention

Once you have established a customer relationship, trust is central to maintaining it – in fact, PayPal’s 2020 survey found that trust in a retailer was the single biggest reason for choosing to shop there. Customers are increasingly aware of the risks of cyber attacks and expect the retailers  to protect their personal identifiable information (PII), including payment information, at all times. Compromised customer data can do more than ruin the holidays, it can irrevocably damage a brand and destroy trust, resulting in long-term customer loss which is very difficult to restore.

Unfortunately, the events of the past year have initiated a surge in account takeover (ATO) activity, which is up 55%. This is a form of online identity theft where a fraudster gains unauthorized access to an individual’s account in a given system. Once attackers have accessed an account, our research shows they act fast, with 40% of fraudulent activities taking place within 24 hours of the account being compromised.

Therefore, the onus is on retailers to ensure they protect customers continuously, not just when they reach the checkout.

Achieving this means applying intelligence that goes further than simple payment analysis. By understanding the customer’s typical behaviour, such as log-in activity, browsing habits, and augmenting this with machine learning, attacks can be detected rapidly, and customer trust maintained. By being part of a global network, retailers can also be alerted to different types of ATO attempts, and how to prevent them from occurring.

• Automate for fast, safe and convenient delivery options

Delivery has become an increasingly intensive area of competition since the pandemic. Customers want safe, convenient options like same-day delivery, Buy Online Pickup In-Store (BOPIS) and curbside pickup that minimises their personal risk, fitting around their post-pandemic lifestyle where many still work from home and don’t frequent shopping centres. According to PayPal, 72% of customers increased their use of curbside pickup in the 2020 peak season, a trend that is set to continue.

The coming Christmas season will hopefully be an opportunity for families to make up for the celebrations they missed out in 2020. Should no further national restrictions be imposed in the UK, time spent with family and friends will be at a premium – no one wants the frustration and wasted time of having to chase up delayed deliveries. Retailers now have the infrastructure to offer ultra-flexible delivery options and highly reliable fulfilment services that mean packages arrive on time, regardless of whether the population are staying at home, or spending time with family. This will only work if the transaction process is fully automated, with no time-consuming manual reviews that slow the process down and risk missing shipping deadlines or causing customers to cancel orders.

Automated fraud prevention also enables retailers to more effectively scale when the holiday season spike kicks in; instead of having to employ seasonal staff to complete manual reviews, an automated system simply scales up when needed.

• An abuse-resistant returns system

The final key step for retailers to focus on is the “last” part of the customer journey: returns. They’re an essential part of service provision and customers want to know that they have options to return products if they aren’t as expected – particularly over the holiday season, when they are making more purchases than usual. PayPal’s figures from 2020 suggest that 63% of shoppers returned or planned to return at least one item purchased during the holiday season and they are using multiple channels from Buy Online Return In-Store (BORIS), to designated drop-off locations, mailing services and curbside options.

However, retailers don’t want to see their generous, flexible returns policies abused by bad actors who can take advantage of disconnections between purchase and returns channels; nearly 1 in 10 returns are abusive. Striking the balance between great service and revenue risk is the key to happy returns.

Again, advanced behavioural data augmented by machine learning can help retailers distinguish between genuine customers and policy abusers. Without this data, it’s increasingly difficult to identify and stop a first-time abuser of returns policies without risking blocking a potentially good new customer. The larger the fraud prevention network, the better chance retailers will have at spotting these fraudulent actors, as is the ability to seamlessly cross-reference data to spot repeat offenders. Because returns abuse looks different for every retailer, a blanket application of rules won’t be effective. By using a sophisticated fraud prevention platform, retailers can maintain a great service for customers while reducing returns fraud risk.

There is no time like the present

The 2021 peak season will be upon us very soon; it has started increasing early as the shift to online has intensified in recent years. This was particularly evident in 2020, the first truly digital-first holiday season. We predict that customers will continue to take advantage of the fast, flexible online purchasing and delivery they’ve grown to appreciate over the past eighteen months. Unfortunately, we predict that fraudsters will also take advantage. By focusing on customer experience and fraud prevention through the four steps above, retailers can stay ahead and build customer trust and future revenue that lasts through the festivities and beyond.