More and more we find that furniture shopping begins for consumers on the internet. Why? First – it’s easy! Shoppers can readily browse websites and search for products from the comfort of their home. Second – it’s not every day that people buy a new sofa or bedroom furniture. In fact, years may have passed since their last major furniture purchase. So people use the internet to begin their research, understand trends, and narrow their criteria.
Finally – consumers buy everything else online, so why not furniture? If nothing else, starting the process online will make them feel smarter and more empowered when they walk into your store.
Fraud Moves from The Physical Store to the Online Channel
A few years ago, U.S. financial services companies implemented chip technology for credit cards in following payment practices adopted across the globe. This change shifted fraudulent activity from physical stores to the online channel (aka “card-not-present”). Blueport has aggressively moved to get ahead of this trend in order to combat the potential impact for furniture retailers. And from all accounts we have succeeded.
More than ever, bad actors, or those committing fraudulent activity, have multiple avenues to exploit online retailers. This means merchants need to have efficient and effective fraud solutions in place to protect their business and the customer experience. As bad actors continue to evolve their techniques, merchants should counter them by adapting their methods and technologies.
Three Trends of Online Fraud
Over the past year, the top fraud trends involve synthetic ID, account takeover (ATO), and friendly fraud.
Synthetic ID occurs when a bad actor creates a fake credit account using a combination of real and fake personal information. Financed transactions make up about 15% of the total platform volume for Blueport clients and these orders hold additional risk since an account may be created with a compromised social security number. These accounts appear to be legitimate because there is partially correct data provided and the scope is difficult to determine because it can go undetected for years.
Account Takeover happens when a bad actor provides accurate billing information which does not correspond to the actual social security number or identity of the original account holder. This may occur when a bad actor uses stolen credentials to access an account and change the information from the real cardholder to their own. We believe this to be the reason behind 75% of our chargebacks (i.e., true fraud) on our platform. Although it is extremely difficult to detect, other high risk data points and our enterprise workflow allows us to assess the customer’s footprint and prevent the majority of ATO transactions.
According to the PaymentsEd Forum and Ethoca, friendly fraud for the physical goods space has increased 41% over the past two years. Friendly fraud occurs when the real cardholder disputes a transaction but had knowledge of and/or benefited from the transaction. Sometimes this is due to buyer’s remorse or a customer trying to game the system. Although this increase is happening at a macro level, Blueport has seen a 38% decrease in fraud exposure across the platform due to our stringent rule analysis primarily focused on friendly fraud tactics.
What Furniture Means for Fraud
In 2017, Experian reported that ecommerce fraud attempts grew by 30%, almost twice as fast as ecommerce sales grew. Although the home goods vertical did not see the same drastic growth, fraud activity remains significant in the world of omnichannel furniture. With every step a merchant takes to prevent fraud, bad actors remain relentlessly determined to counteract preventative measures. It’s a proverbial battle of who can outwit the other, and like every other sector growing online, the furniture industry must be aware of ever-changing fraud tactics.
In an era of data breaches, the fraud landscape continues to grow across ecommerce and the value of fraudulent transactions tends to be much higher than a general purchase. For this year, Blueport saw the average value of fraudulent transactions are roughly three times the total average order value of non-fraudulent purchases. In addition to incurring the loss of merchandise, the merchant will also be impacted by the loss of all operational support costs, as well as bank fees.
Fraud attacks often transcend beyond financial implications and start to erode brand affinity and customer loyalty. As fraud continues to evolve, merchants are tasked with trying to maintain the latest technologies and processes around a successful fraud management solution.
Furniture Fraud is Expensive and Requires Consistent Management
This year roughly 1.8% of gross written sales was fraudulent for Blueport’s North American furniture clients. Unchecked, these fraudulent transactions would result in costly chargebacks for the retailer and brand reputation damage with consumers. Blueport’s sophisticated fraud management practice enables retailers to minimize this exposure without creating customer friction for legitimate furniture buyers.
With a fraudulent furniture transaction being so expensive, it’s important that high risk transactions are properly managed to limit losses and keep customers happy. Blueport has a proven track record of protecting our clients from fraudulent activities, offering an expert perspective on the need to execute a strong fraud management system that protects omnichannel sales and providing robust tools, reporting and analytics to back it all up. And as ecommerce sales continues to soar, the means and ways to commit fraud are also evolving. This means Blueport is always evolving, too.
The Blueport Fraud Methodology
It’s about our balanced fraud expertise: Our proven model combines machine learning and a rule engine with human intelligence for a holistic strategy. We understand various risk tolerance profiles and rely on data to support minimizing manual review and boost “good” revenue, while being sensitive to the customer experience and tenacious towards chargeback mitigation.
It’s about understanding the furniture industry: Furniture shopping is a combination of online and in-store research. Blueport’s platform is the leading solution for omnichannel initiatives. Signifyd’s Risk & Reward study reported 45% of consumers research furniture purchases online and 24% of those consumers convert to a sale. We understand the customer demographic, as well as online and in-store relationships, and are prepared to manage the risk across the ecommerce channel.
It’s about the data: Blueport adopts a next-generation, multilayered fraud approach to combat rising fraud exposure and sustain a well-supported customer experience. We are able to identify evolving trends and perform root causes analyses for individual and collective merchants on our platform. That means you get the best fraud protection in the industry alongside benchmarking metrics of furniture retail.
We have an enterprise workflow with demonstrated growth and accountability, which is captured in robust reporting and analytics. This allows for providing insightful dashboards on a daily or weekly cadence, as well as a comprehensive quarterly overview of your fraud and risk performance.
Blueport helps merchants handle the scale of their ecommerce business as sophisticated fraudulent attacks are continuously evolving. Our fraud team protects the business and the brand, while providing a positive customer experience and preventing chargeback losses. Interested in learning more? Contact us today to speak to someone on our fraud team.