How to Prevent Online Consumer Frauds?

Does building an online community help businesses? You might have the answer or not. But, a study by a well-known tech platform has found the correct answer that justifies why you should build an online community.

According to the study, the likelihood of consumers returning to a brand with a robust online community is 72%. And that amounts to more than three-quarters of your consumers.

Now, you must have understood why you need to build up an online community.

The study also found another interesting fact. It found that almost two-thirds, or 63%, of consumers, admit they are more likely to buy from a brand that leverages engaging social features on its app.

Businesses must prompt their digital communities to foster personalized brand-consumer relationships and establish a competitive advantage. With in-app communities, companies can increase trust, build a loyal consumer base, and increase sales.

How Frauds Are Hampering Retailers and Consumers

In the UK, more than half of the retailers believe that they are doing everything they can to prevent e-commerce fraud, but only around 17% of consumers have confidence in them.

Riskified e-commerce enablement and fraud-prevention solutions providers highlighted the lesser confidence of consumers in retailers.

Its research involved 4,000 consumers and 400 retailers across the US, UK, France, and Germany. And it showed that online retail fraud is widespread and results in grave financial impacts apart from showing how shoppers perceive retailers in case of such fraud.

Fraud Attempts Are Increasing

Despite retailers’ attempts to prevent fraud, there has been a rise in such fraud. For example, more than 82% of retailers in the UK say they saw an increase in fraud attempts since the COVID19 pandemic started.

They further revealed that the Card Not Present and Promo Abuse were the frauds with the highest occurrence, causing negative financial impact.

The frauds took a toll not only on shoppers but also on retailers as well. As a result, retailers saw significant erosion of their bottom line, hampering their profitability.

The fraud incidents have more impacts on retailers. More than 34% of global retailers said that they lost 5 to 10% of their e-commerce revenue to fraud in 2020.

Due to the prevalence of online fraud, the trust in retailers waned. More than 34% of consumers lost their trust in the retailers’ ability to prevent online fraud. Despite this, more than 55% of retailers claimed that they were confident in their ability to avoid e-commerce-related frauds.

More than 27% of online consumers in the UK said their concerns over online shopping frauds continue to grow. And what is more, more than 51% of consumers said that retailers would find it more challenging to prevent such frauds during the next year.

Apart from retailers, brands also suffered a loss of consumer confidence due to the prevalence of online fraud.

More than 39% of UK consumers said that they would put the entire blame on the retailer when frauds compromise their accounts. And more than 67% of consumers said they would not buy online again from a shop where their account was compromised.

New Technologies for Fraud Prevention

For fraud prevention, two-factor authentication is regarded as the most effective means by consumers.

But, it proved to be a damaging entity for revenues for the UK and French retailers. Moreover, it is the second most dangerous factor for US and German retailers. The damage arises due to the friction it adds to the customer experience.

However, the emergence of new technologies has brought in hopes among consumers to reduce online fraud. The new technologies are likely to enable a smooth payment process and reduce fraud incidences.

Conclusion

With the rapid growth of e-commerce businesses, online fraud incidents have also risen, putting customers and retailers at risk. 

Due to fraud, retailers face unique challenges to protect their businesses while delivering consumers seamless and safe experiences.

According to projections, retailers’ monetary losses due to fraud are likely to increase in three years.

Therefore, retailers should adopt safe practices to lower the risk of fraud.