By Ed Whitehead, MD EMEA, Signifyd
Along with the rest of Europe, the UK will soon be under stricter SCA regulations that will have a direct impact on ecommerce sales, to protect both retailers and consumers from fraudulent orders. For UK-operating companies, the regulations will be a welcomed source of protection, but how will these regulations impact global brands, with a large majority of customers buying from other parts of the world?
Countries outside of the EU all have different approaches and regulations when it comes to e-commerce fraud, and many have extremely high rates as a result. Falling victim to overseas payment fraud, means businesses will be liable for chargebacks,
For businesses, this causes a double-edged sword – the risk of processing fraudulent orders and fitting the bill, or turning down revenue from genuine customers.
How do attitudes towards SCA protection vary, and what are the implications on UK businesses?
No merchant really wanted SCA. Perhaps, the intended goal / concept of eliminating fraud was appealing but when faced with the reality of how it was going to be implemented, merchants became very nervous about the consequences of losing traffic with figures of 25% plus drop off being loosely thrown around.
The reality is actually there were many solutions in the market that could prevent fraud down to the intended levels without disrupting the checkout so much, but the wheels had been set in motion for PSD2 some time ago and so ahead it went. We could debate the real beneficiaries of SCA in the payments chain, but that is a different article!
But the fact is it is already in roll out, and whilst there is a lot of improvement to be made and far too low authentication rates, it isn’t quite as catastrophic as feared. The process will be ironed out and the phase 2, if you will, of making the experience for customers better is bring about some exciting innovation in the market such as our Seamless SCA.
The UK market itself will benefit also from the later enforcement date than the rest of the EEA. There will be learnings we can draw from and ironically although the UK is the last market to enforce, it is one of the most prepared with many banks already using the latest versions of 3DS.
What are the potential risks businesses are putting themselves at, by selling outside the EU?
Probably one of the key risks is not knowing how consumers behave in a territory you are not familiar with. That isn’t to say a business should not sell outside of their own country or indeed the EU as, in the right circumstances it provides a huge growth opportunity – its just merchants should firstly assess if the revenue opportunity outweighs the risk and then secondly make sure they have enabled their teams with the data and insight to treat the customer correctly. For example, returns across borders are going to be far more expensive. In some countries it is common for consumers to buy multiple sizes, versions, colours etc with the intention of only ever keeping one item and in other countries the purchaser is much more considered and the environmental impact of returns is in itself an influence on behaviour. All those considerations and many more feed into packaging and delivery options, returns policies and ultimately and the true value of that customer. A serial returner for example is actually not so valuable and may need to be treated differently.
Another concern is simply the likelihood of a customer to chargeback a purchase. Countries like the US have a high penetration of credit card usage and the consumer is very familiar with the chargeback process, sometimes filing an item not received or unrecognised transaction claim rather than making a return. These types of consumer abuse and friendly fraud are on the rise.
How can businesses expand internationally, whilst keeping fraudulent orders in check?
This is all about using the right tools and insights and extends on the risks highlighted above. When selling into a new territory as a merchant you are less likely to have seen that customer before or know their history. They are a new customer to you and therefore you are likely to be more risk averse when considering whether to accept this order or not. Similarly, going back to the returns piece, if a consumer is new to you but known to be a serial returner in the network, do you want to treat them differently?
This is where a solution such as Signifyd which uses a network of data and intelligence can give you the confidence to accept more orders upfront. Although it may be a new customer to the Merchant, it will not be a new customer to Signifyd and through the data points and history associated with the transaction, we can accurately predict if this is a good transaction or not. Furthermore, should our merchants require it, we can provide a chargeback guarantee both for fraud and also the consumer abuse type claims highlighted above. We simply payout to the Merchant if they receive a chargeback and then we use our data and insights to successfully dispute fraudulent claims, not only recovering the revenue but also making sure the merchant’s website doesn’t get a reputation as an easy target. It’s a phrase we use a lot, but I think it is very relevant – we help merchants grow their business internationally, without the fear of fraud.