Post-Christmas sales set to highlight retailers’ unholy trinity – Tolerance versus convenience versus security

Given the ongoing economic squeeze on many households, tolerance, convenience and security are now the three critical issues and of acute importance for retailers and ecommerce sites.

The dilemma faced is epitomised by three separate findings made by Experian. On the one hand online shoppers will tolerate up to four minutes of checks before abandoning their transaction. But despite ecommerce’s relative convenience, it is estimated that more than £1 billion worth of online transactions were abandoned as customers got frustrated at delays.

It also emerged that one in five of these abandoned transactions were not taken elsewhere as individuals cancelled their shopping attempt altogether – equating to around £214 million worth of net lost revenue.

Research conducted for Experian by the International Fraud Prevention Research Centre, including key insights from online retailers and the Office of National Statistics, also highlighted how nearly half (44%) of UK shoppers abandoned at least one online shopping transaction within the past year after getting frustrated with the length and complexity of older forms of identity verification.
But there are clear variances in tolerance times by sector. For instance shoppers visiting online retail  sites are prepared to undergo four minutes of checks, unlike online banking customers who tolerate up to five minutes, while online insurance and travel customers are prepared to wait  up to six minutes.
At the same time, online retailers are obliged to balance the relative risk of shoppers’ evident impatience against validation levels, as it is clear consumers need to be more security-savvy after it emerged that global fraud networks traded more than 12 million pieces of personal information, during the first four months of 2012. 
The illegally-traded personal information included millions of log-in and password combinations. It put millions of consumers’ online accounts at risk as the average Briton will have 26 separate accounts but use no more than five different passwords.
There’s clearly a huge benefit to ecommerce sites that are using less efficient identity checks to upgrade to newer tools, which enable improvements in security levels and faster, less onerous checks.
Operators will not only be protecting their cash-flow and online sales, more importantly they will be helping protect their customers from fraud which will underpin their reputations among shoppers and peers alike.
Considering the value of abandoned transactions, using up-to-date technology that enables extremely robust identity checks, which are completed almost instantly, makes the investment well worth it.
Older forms of online identity verification are typically complex, standalone systems drawing on single sources of information to corroborate identity information. They are often unable to validate as many individuals electronically as modern services. As a result, genuine customers may be forced to call a contact centre, submit physical documents through the post or visit the store or branch to confirm identity. Alternatively, the organisation might choose to accept a lower level of proof, and risk higher levels of fraud, in order to minimise customer inconvenience.
But it’s not all doom and gloom for retailers. It is estimated that total fraud losses on UK cards fell to around £340 million last year, representing an overall seven per cent year-on-year reduction.

The fall is due to the growing prevalence and adoption by retailers to online protection initiatives, successful campaigns to raise customer awareness, improved sharing of fraud data and intelligence within the industry, with law enforcement and other sectors. At the same time, there have also been drives to safeguard chip and PIN equipment, greater deployment by both retailers and banks in using fraud detection tools, the continued upgrading of the chips on UK cards and increased roll-out of chip and PIN abroad.

But it’s also a matter of vigilance and the cost-effective use of technology by all sides, because we also know that fraudsters are fast, adaptable and inventive – if an opportunity is spotted.