What could possibly get in the way of a sale once a consumer has loaded up her virtual shopping cart and hit “buy?” At that point, the promise of a sale should be more or less like the set-it-and-forget-it RonCo oven of online retail – sit back and count the sales that roll in. After all, the hardest part is getting the consumer to the site?
Karen Webster caught up with BlueSnap CEO Ralph Dangelmaier to talk about why many online retailers lose a customer the moment they decide to buy.
And much of it comes down to heavy-handed fraud controls brought about by three little letters: E.M.V.
When Hitting “Buy” Means Bye-Bye
Here are the facts of online retail life, according to Dangelmaier.
Depending on the merchant, the types of products they sell and dozens of other granular factors, once a consumer hits “buy,” abandonment occurs more than 40 percent of the time.
"As soon as EMV started to really get pushed down into the [physical] stores, a lot more fraud moved online," Dangelmaier explained. "As that fraud moved online, the merchants, the processors and the banks began to write stricter fraud rules, and that's starting to block a lot of good transactions."
In other words, denying consumers who really want to buy and who have the capacity to do so, the chance to be a customer then – and perhaps forever.
Currency mismatches from cross-border buyers or dollar threshold triggers intra-country or cross-border are common triggers, Dangelmaier said. In some cases an overabundance of caution from a regional bank can deny an honest payor, too. Dangelmaier explained that many smaller financial institutions don't have very much experience processing payment information from cards issued in other countries so just flat-out block those transactions out of the fear of potential fraud.
It's a serious problem according to Dangelmaier, not only for the potential to frustrate customers when they're looking to get in and out with their purchases, but also because online merchants seem to have overlooked an entire world of friction in the path to purchase.
"Merchants spend a lot of time on friction on the front-end [aka getting consumers around their websites] but not on the back-end, which is where you get all these declines and the sales truly disappear," Dangelmaier said.
Not All Fraud Rules Are Created Equal
A few years ago, Dangelmaier explained, catch-all fraud protections might have been a net positive for online merchants, if only because the number of legitimate consumers who triggered declines was such a small percentage of the total. Now, though, consumers are buying over multiple devices, from multiple countries and sometimes even in different currencies depending on advantageous exchange rates. Overzealous fraud rules can decline all of these transactions – from perfectly good buyers.
"I know we at BlueSnap spend time with merchants educating them and trying to learn their business to make sure the fraud rules match what they're selling," Dangelmaier told Webster.
What does this look like in practice?
Interestingly enough, the price of as well as the nature of product has to be carefully considered. Of course, there’s the obvious difference between authorizing a $5 transaction and a $5,000 product, not to mention the growing divide between sales of physical and digital items. But if the fraud rules don't take into account the way good and bad guys attempt to purchase those items, merchants could be in for a world of hurt when it comes to their revenue streams.
Subscription services, a popular and growing part of online retail, is also a trigger. Dangelmaier explained that it's become common practice among banks to stop payments for subscriptions and contact the consumer directly to obtain bulletproof verification that a subscription is actually what they want. While such caution should be applauded, it's another wrench in the gears of an otherwise frictionless checkout process - and one that consumers who did actually intend to pay for the recurring service don't expect to deal with.
Sometimes, though, old habits on currency conversions can lead online retailers to shoot themselves in the foot. Where several years ago the method du jour was to force all currencies into the one used by the merchant, Dangelmaier explained that retailers would see fewer declines if they kept the currency in whatever form used by where the payment card was issued in. This is, of course, more work than any moderately sized online retail operation can handle on its own, which is why having multiple banks involved in processing payments as native to the customer's card as possible has become such a critical element of capturing those sales once the consumer said they want to buy.
As Dangelmaier poetically summarized: "One bank does not service a global world anymore."
Flexibility is Key, But Not Easy
With consumers coming from so many different locations, using different currencies and utilizing different payment platforms, it's no longer OK for merchants to think that they can protect themselves via inflexible fraud protection armor. While the possibility of bad transactions will always be a threat, Dangelmaier emphasized the need for long, hard looks at which granular fraud protections make sense — and for much more than just the sticky bits of cross-border commerce.
"Merchants are shocked when they learn that if they price a product $48 rather than $49, they could get a 10-percent pickup in their declines," Dangelmaier told Webster. "And that dollar is immaterial to the new sales that they get."
What is material is taking a good, old-fashioned detail-oriented analysis of the retailer’s back-end operations before they ever reach that point. As consumers grow more accustomed to getting what they want when they want it with as little interruption as possible, the merchants who really understand why they’re losing sales and then take steps to improve their checkout conversion after that “buy” decision has been made, will likely see their declines, well, decline. And their shoppers leave after making a sale.