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Can Mitigating Fraud Increase Sales?

posted on: Tue Apr 30 2013

Unfortunately, many online companies view fraud management as a cost they don’t need right now, while failing to see the advantages and incremental sales opportunities that a proper fraud detection platform can offer.

Fraud is a nasty issue that most company owners and managers don’t like to talk about. They see the detection and management of fraud as a cost center, a necessary evil the company has to deal with. While this attitude is pretty common, it couldn’t be more wrong.

According to a recent national survey of online businesses, the average order rejection rate due to the suspicion of fraud is 2.8% in the U.S. and 7.8% internationally. If your company is near the average this means you spend valuable time, money and resources to drive traffic to your site, convert lookers into buyers and still end up rejecting a significant number of orders because they look suspicious.

Ask yourself - what would it mean to your company if you could reduce your order rejection rate by half? Better yet, if you could increase revenue by 1.4% to 3.9%, how much would that be worth? Let those numbers churn through your head for a minute or two.

Online businesses also suffer millions of dollars a year in added costs by resorting to manual order reviews to manage increased fraud. This not only impacts business resources and increases overhead, it impacts the Internet consumer, who expects immediate response, instant downloads and no approval delays. Another 2012 study concluded that every second of performance delay on a website can translate into a reduced sales conversion rate by as much as 7%!

Run those numbers again. How many orders do you manually review every day? Each one costs you money and the reputation of your brand takes a hit too. Delays in approvals can cost as much as 28% in lost orders (per a survey conducted by American Express). Of those customers who experience delays, nearly one third go elsewhere to purchase.

These are just two areas that are often overlooked when considering the benefits of a fraud solution. Even companies that don’t believe they have a fraud problem have implemented a fraud management platform and seen revenues increase. Just think what that could mean for your business.