E-Commerce Retailers Face Long-Term Challenges as Payment Fraud Damages Customer Trust

Today’s consumers demand instant and excellent shopping experiences. For many retail brands, if these expectations aren't met, it can have major impacts on trust, loyalty and long-term growth. A key component for successfully keeping customers happy is providing them a secure experience while they interact with a brand’s site. However, as fraudsters become more sophisticated in how they carry out their attacks, retailers continue to battle ongoing issues in keeping legitimate users secure on their sites — putting long-term customer trust and revenue growth at risk.

To understand how fraud affects consumer trust and loyalty, Sift recently conducted a survey of 2,000 U.S.-based consumers over 18 on their experiences, behaviors and perceptions relating to fraud with brands. Top takeaways explore how consumers feel about brands’ abilities to protect them, how loyal consumers are when problems occur due to fraud, and who they blame first when fraud happens:

1. Consumers don’t trust brands to protect them: Fifty-six percent of survey respondents said they're most afraid of payment fraud over other types of fraud such as account takeover, fake accounts, and fake content. What’s more, only 17 percent of respondents feel brands are equipped to protect them from fraud. Many consumers don’t think retailers have safeguards to protect them from online fraud when it occurs, causing mistrust even towards brands they like.
2. Abandonment is high and loyalty is low: Consumers won't continue to buy from a favorite brand if they encounter problems. Forty-seven percent said they will abandon a brand and immediately go to another’s site or app to make purchases if they come across a problem just one time at any point during the buying process, from account creation to payment.
3. Consumers feel responsible but won’t shoulder the blame for fraud: Consumers admit they feel responsible for making sure their payments are secure, but when a fraud event occurs, they blame the brand first — before banks, credit cards, payment processors, or themselves. Ultimately, consumers assign blame to the brand if they feel that it didn’t either properly address or fix the issue after a fraud event occurred, or too many fraud incidents continue to happen.

What This Means for E-Commerce Retailers

Fraudsters are constantly becoming more sophisticated in their attacks, as we’ve seen from several hacks and breaches just in the last year — Under Armour, Marriott and Adidas all come to mind. Brands need a strategy to address this growing sophistication, such as a digital trust and safety approach. Adopting this kind of strategy helps brands address risk concerns without sacrificing business growth. A digital trust and safety approach isn’t solely about fraud prevention. It's also about changing the entire mind-set of a business. It looks at risk and business growth as connected parts, addressing how to lower the former while increasing the latter.

Many retailers are behind the fraud-fighting curve because they’re using outdated strategies and legacy systems, such as rules-based solutions. Previous Sift data shows that 45 percent of businesses say rules-based systems don’t effectively prevent fraud for them. Additionally, 60 percent of companies using rules for fraud prevention say they block legitimate customers, creating more instances of mistrust and lost consumer loyalty.

Retailers and e-commerce brands need to surpass the changing tactics of fraudsters, leaving legacy systems behind and shifting their overall strategies and mind-sets to smarter and more effective fraud prevention methods. Fraud continues to play a major role in causing friction and loss of trust between consumers and brands. However, a digital trust and safety strategy brings brands to the forefront of fraud prevention to fight fraudsters and boost growth.

Kevin Lee is a trust and safety architect at Sift who helps customers implement strategies that cross-functionally align risk and revenue programs.