Aside from a few bumps in the road, the international e-commerce market has been on the rise over the last several years. But a closer look into recent retail sector data reveals that a downturn, or worse, a recession, may be on the horizon. Or it may already be here
A major survey from National Australia Bank (NAB) shows that the retail industry is in recession due to an increasing drop in confidence and conditions, defined by employment, trading, and profitability. Other major consumer markets aren’t faring as well either. China’s retail sales growth has dropped to a 16-year low amid fears of additional trade war risks (which are unpredictable to say the least) and in the U.S, retail store closings in 2019 have already surpassed all of 2018.
Whether a financial downturn is localized to retail, or macro-economic trends discourage overall consumer spending, your business needs to adapt or face the consequences. Our recommendation? Reducing false positives.
Reducing False Positives To Keep Your Bottom Line Intact
If consumer spending is expected to decrease significantly, reassessing your fraud prevention strategy to lower false positives is a way to keep your business from suffering a big revenue hit. Here’s why.
False positives are costly
According to a Javelin study, one in fifteen cardholders experienced a false positive in 2017. That means billions of dollars of lost revenue. During a period of slower sales, you can’t afford to leave that kind of money on the table.
It’s beneficial for long-term consumer retention
If a customer wants to make a purchase and finds their transaction declined, they may reconsider doing business with that company and instead look towards a competitor. An Oracle study found that 89% of consumers began doing business with a competitor “after a poor customer experience.” If a customer’s card is erroneously declined, that experience is often embarrassing, confusing, and frustrating. Would you blame them if they went to shop elsewhere?
Rethink a rules-based fraud prevention strategy to reduce false positives
False positives can often result from a rules-based fraud strategy that hasn’t kept up with current fraud techniques or actual consumer behavior. The rules in place are too rigid and will flag transactions as false even if they’re genuine, because they can’t account for unique or out of the ordinary scenarios.
To remedy this, organizations often incorporate a manual review process and/or one-off situational exceptions but this reactive approach doesn’t get to the heart of the problem. Organizations need to be proactive when it comes to their fraud prevention strategy, including approaches aimed at reducing false positives.
Certain cultural and spending norms change by region and market. If a blanket strategy is used for all geos, false positives are bound to occur. Unique shopping scenarios will always come up. It could be due to travel, emergencies, holidays, or last-minute and unexpected needs. You don’t want to be the retailer that falsely declines a transaction when a customer is in need.
By adopting a real-time fraud prevention strategy bolstered by machine learning and an ever-growing identity database, you’re able to make the right decisions when faced with unique shopping scenarios, reduce your false positives, and retain happy customers, even in economically trying times.