How the move to an online society shines the spotlight on fraud

COVID-19 has had a permanent impact on consumer behaviour and expectations. As a result, retailers are forced to rethink their in-store and online shopping strategies for the long term. 

Australian businesses experienced a cashless growth spurt throughout 2020, with the number of cashless payments jumping from just 8% in February 2020 to 37% in April, when stay-at-home mandates were first enforced across the country.

This change in behaviour has now become normalised. In fact, the annual Global Payments Report released in March 2022 predicted that in Australia only two per cent of the value of all point-of-sale transactions will be in cash by 2025.

With all of this in mind, what adjustments should retailers be making to offer new, engaging and digitally integrated customer experiences, while also protecting revenues and customers from the risk of fraud that rises as more digital payments are made both in-store and online?

The changing place of fashion stores in omnichannel strategies 

Despite the ease of ordering online, many traditional buyers still value the opportunity to get hands-on with garments and we are likely to see stores becoming more like showrooms where customers can browse, before they order items for home delivery or Click and Collect, all with minimal physical contact. 

This means that the in-store experience needs to be digitally supported and integrated much more closely into the customer’s overall buying journey. Up to now, despite concerted efforts, in-store and online channels have generally been operating in parallel, rather than complementing each other. 

Retailers need to show that they know and value their customers when they’re in-store by providing options for them to explore related product suggestions, style inspirations based on purchase history and new product launches and tailored special offers targeted to maximise the potential to purchase, so that the value of time spent in-store is maximised for both customer and retailer. 

There’s also another side to this. We have a tendency to think it’s all about getting online purchasers to come into stores, but it works the other way, too. Buyers who still prefer to shop in-person and may simply have stopped purchasing non-essentials such as clothing altogether during the lockdown phase of the pandemic, must be encouraged to embrace eCommerce as an extension of their preferred in-store purchasing approach. If lockdowns return, retailers can’t afford to lose these customers entirely, so they need to focus on attracting them to engage digitally with the brand.    

For both types of buyer, after the in-store visit, the customer experience needs to continue seamlessly online, reflecting purchases and preferences to prompt further interaction. Here, loyalty programmes play a big part in building brand communities and a lot of fashion retailers are ramping up activity. Consultants McKinsey recommend that retailers “look to [their] most loyal customers to jumpstart growth” by offering highly personalised special offers and VIP experiences to drive purchases.

Protecting against fraud risk as digital payments become the norm

The move away from physical payments has been on the cards (excuse the pun) for some time. COVID-19 and the need to reduce physical touchpoints has only accelerated the shift. However, as fashion retailers focus on re-framing their omnichannel strategies to respond to the impacts of COVID-19, it’s important to consider the effects that an increase in online payments have on fraud risk. With the economic situation in flux, consumer confidence fragile, and analysts such as Global Data suggesting that purchasing of clothing and footwear items may fall by up to 20.6%, retailers must protect against fraud losses without alienating the new eCommerce customers that are crucial to future revenues.

This poses a challenge. Retailers need to make eCommerce purchases as frictionless as possible – especially for customers who may have previously preferred making that transaction in-store – but they are also obliged to conduct checks or risk failing to identify fraudulent transactions. The risk is high – Forter data showed that eCommerce transactions increased 337% during the lockdown phase of the pandemic, with a slight drop as stores were reopened but sustaining the elevated trend thereafter. 

Australia has always been an early adopter of technology, particularly payment tech; however, there is significant room for improvement in the prevention of fraud and identity theft. Again, consider that Australian businesses lost $442 million to fraud in 2021, and as much as 30 times more to false declines of good customers — that is tremendous value that is being left on the table. 

Laggards will stick to legacy rules-based systems and manual reviews. Leaders will embrace advanced technology to make more accurate decisions, approve more transactions, generate more revenue and grow consumer lifetime value.

The key to identifying genuine transactions is detailed knowledge about the purchaser and whether their behaviours are legitimate. But, if they are a new customer, the information the merchant has in their own system is limited. To make a fast, accurate decision on whether a transaction is genuine, merchants need wider context that analyses the buyer’s historic behaviour across multiple platforms and comprehensively assesses the fraud risk that they pose. It is essential that the decision is correct, as false declines cause huge damage to the customer relationship, leaving genuine buyers angry and losing the merchant not just the first sale, but most likely any future business from that customer, too.

Here, partnering with a fraud prevention provider that can deliver comprehensive, contextual customer behaviour data facilitates real-time decisions and ensures that genuine customers proceed without friction, while suspicious transactions are queried or blocked. 

A seamless fraud prevention solution that is effective across all channels will become increasingly important as the shift to omnichannel continues and the volumes of digital payments merchants need to process rises. As brands seek to provide exceptional customer experiences wherever they take place, getting closer to the customer in every sense – including fraud risk – is critical.