Open Banking Data for Online Shops: Avoid Fraud and Convert More Customers

16. November 2021 / in Knowledge

Caution is the mother of... moderately successful e-commerce businesses. But is the cautious mother right to be so? It’s not all that straightforward. On the one hand, e-commerce success is still measured first and foremost by conversion rates. In other words, a good online shop is still characterised by high sales.

However, when you look at things more closely, you see that sales aren’t always a success; some sales can be harmful. Risks in e-commerce increase with the number of sales. Learn how to make data-driven decisions to offer customers their favourite payment method, boost conversions, protect against fraud and above all, ensure customer satisfaction remains at a consistently high level.

Striking the Right Balance Between Conversion and Security

Cybercriminals continue to find new ways of defrauding digital businesses out of millions every year. In fact, chargebacks are the most expensive and common type of fraud currently experienced by online retailers. Friendly fraud (also known as first-party fraud, i.e. when customers tell their bank they didn’t make a credit card payment to an e-commerce company) is not a rare occurrence in this area. Account takeovers, which are widespread in gaming and increasingly in other areas of e-commerce, are new and spreading rapidly.

Accordingly, it’s crucial that online retailers make a determined effort to combat fraud and use effective fraud prevention tools. However, they don’t always help themselves! For security reasons, many rely on monitoring processes that are based exclusively on historical data. This creates false positives and rejects customers who would actually be legitimate buyers but don’t meet the strict, automated rules at first glance. This results in a disastrous customer experience and represents one of the most likely ways to lose customers. 

For these reasons, it’s vital you strike the right balance between high conversion rates on the one hand and secure risk management on the other. In other words, offering serious customers an optimal buyer experience while ensuring a zero tolerance policy towards fraudsters.

And there’s more: find out how Open Banking is taking e-commerce to the next level, not just in terms of fraud prevention.

Secure Installment Payments and Purchase on Account Thanks to Open Banking

Where do things go awry in e-commerce? Put simply, the problems boil down to the nature of the payment method. The most popular payment method in German-speaking countries is purchase on account (buy now, pay later). Customers want to enjoy the same buying experience when shopping online as they do in shops: see, try on, test and then pay. Retailers who value high conversions cannot avoid offering this payment method.

It goes without saying that this method is susceptible to fraud, i.e. buy now, pay never. Fraudsters like to play “catch me if you can”. That’s why many e-commerce companies have hard-and-fast rules when it comes to who can purchase on account. These are based on fraud indicators, credit scores and cut-offs. On average, around 80 percent of an online shop’s customers are considered worthy of purchasing on account or even in installments according to the strict rules.

Nevertheless, a considerable number of (new) customers are rejected for purchase on account, typically because of incorrect, outdated or even missing information about themselves or their creditworthiness. In some cases, purchase on account is only offered to existing customers and not to new customers at all. It’s also sometimes capped at a certain value. For customers, the frustration levels are so high that many abandon the purchase process at this point.

Intelligent data analysis based on Open Banking data enables secure purchase on account in such cases via a “second chance loop”. The rejected customer simply logs into their account in real time with their usual online banking data to prove their creditworthiness. After successful verification, the consumer can proceed with the purchase on account.

Thanks to Open Banking, businesses don’t miss out on potential customers and aren’t forced to resort to advance payments, which are a conversion killer and roadblock for customers and retailers. Customers don’t like paying in advance, while retailers don’t like having inventory blocked for a long time and then having to release it again if the payment is not received.

How Open Banking Data Enables High Conversion Rates and Maximum Security in E-Commerce

Open Banking data in general, and the Digital Account View in particular, helps online businesses detect identity theft and fake accounts in real time. Comprehensive data intelligence coupled with real-time data are an effective means of fraud defense and can prevent identity theft. This way, e-commerce retailers avert damage and losses to themselves while simultaneously protecting their customers.

While the Digital Account View provides security for all sides, online retailers also gain better knowledge of their customers, enabling them to make even better offers tailored to their customers’ needs in the future.

CTA Whitepaper Open Banking

Schlagworte: Knowledge

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