Declining eCommerce Transactions From New Customers Is Costing Businesses Millions

https://thefintechtimes.com/declining-ecommerce-transactions-from-new-customers-is-costing-businesses-millions/
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Despite eCommerce exceeding $4.3trillion in 2020, and businesses dealing with new customers, they are five to seven times more likely to decline transactions from said customers, compared to returning ones. Forter’s Annual eCommerce Revenue Optimisation (AERO) report highlights the opportunity cost of falsely declining eCommerce transactions from new customers across industries.

The report looks specifically at the Apparel and Accessories, Food and Beverage, Home and Garden; and Health and Beauty industries.

Apparel and Accessories

  • The research highlighted that new users represent 4% of gross merchandise revenue for the apparel and accessories industry.
  • Forter’s calculations show a direct loss of $500,000 in revenue for every $500million in transactions processed.
  • Forter’s report notes these customers would complete five more transactions within 12 months, and remain loyal customers for an average of four years. Thus, the total impact is up to $10million in lost revenue per year at this transaction volume.

“That’s New User Missed Opportunity [NUMO], and it makes for a compelling case to invest in solutions that optimise genuine customer experience and lifetime value,” said Michael Reitblat, CEO and co-founder, Forter. “Indeed, Forter customers have chosen to instead step into a new era of online shopping with their approach to fraud prevention.”

Food and Beverage

  • The research highlighted that new users represent 6% of gross merchandise revenue for the Food and Beverage industry.
  • Forter’s calculations show a direct loss of $750,000 in revenue for every $500million in transactions processed.
  • Forter’s report notes these customers would complete nine more transactions within 12 months and remain loyal customers for an average of four years. Thus, the total impact is up to $6.75million in lost revenue per year at this transaction volume.

“With the rise in delivery apps such as DoorDash, GrubHub and Favor creating increasing competition between food and beverage retailers, it is critical for these organisations to make sure they are doing everything in their power to attract and retain new customers,” said Michael Reitblat. “We hope that by sharing the results of the AERO report, these retailers gain insight into the importance of preventing false declines while also protecting against fraud.”

new customers

new customers

Home and Garden

  • The research highlights that new users represent 16% of gross merchandise revenue for the home and garden industry.
  • Forter’s calculations show a direct loss of $2million in revenue for every $500million in transactions processed.
  • Forter’s report notes these customers would complete three more transactions within 12 months and remain loyal customers for an average of four years. Therefore, the total impact is up to $24million in lost revenue per year at this transaction volume.

“With the pandemic bringing everyone inside, there has been a dramatic change in how we view our personal spaces. Individuals are choosing to upgrade their environment as they spend more time at home. The increase in revenue for home and garden retailers means it is imperative that these organisations use solutions that optimise fraud prevention and streamline the customer’s online experience,” said Michael Reitblat. “Customers of Forter are witnessing the importance of fraud prevention solutions that also prevent false declines in the wake of a new wave of buyers.”

Health and Beauty 

  • The research highlighted that new users represent 3% of gross merchandise revenue for the beauty and health industry.
  • Forter’s calculations show a direct loss of $375,000 in revenue for every $500 million in transactions processed.
  • Forter’s report notes these customers would complete three more transactions within 12 months and remain loyal customers for an average of four years. Thus, the total impact is up to $4.5 million in lost revenue per year at this transaction volume.

“As eCommerce brings in more new customers, businesses can optimise their lifetime value or lose them with a single decision. If a customer is falsely declined, there is a 40% chance you just lost all of their business for a lifetime,” said Reitblat. “We hope that the findings in our annual AERO report reinforce the importance of striking a balance between fighting fraud and delivering a memorable customer experience.“

Forter’s Persona Graph

Following the results, Forter has amassed a Persona Graph that included more than 1 billion online personas for each industry. This was a solution to assess the trustworthiness of a new customer when a retailer from any of the listed industries lacked historical context. That way, when a Forter customer in any of the industries interacts with a persona for the first time, Forter can determine whether they have seen that persona elsewhere across its global network.

All that history and context informs a decision on whether to accept or reject the transaction in a fraction of a second. And if Forter hasn’t seen that exact persona, it can use probabilistic linking, as pattern-matching a means to make decisions based on similar personas. This is faster and more accurate than rules-based solutions or transaction scores and scales without a dependency on manual reviews.

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

https://thefintechtimes.com/declining-ecommerce-transactions-from-new-customers-is-costing-businesses-millions/