Inside Our Shopping & Fraud Behavior Report

At Riskified, our work centers on relationships with merchants. Our favorite conversations are the ones about how we can help them approve more orders, operate more efficiently, and fend off the threats of fraud and false declines. But, in order to gain some new insights for 2019, we recently turned our attention to U.S. consumers. We wanted to understand what makes them shop and what makes them stop in their tracks.

In December of 2018, we completed a survey of 5,000 individuals,18 years and older, across all 50 states, Puerto Rico, and Washington, D.C. We asked over 30 questions, covering everything from how purchases are made and on what devices to consumer experiences with fraud and declines as well as cart abandonment and merchant loyalty. We then analyzed the results across age, gender, and household income brackets. The results had some real surprises.

In total, the survey results highlight why it’s so important for merchants to be aggressive in approving good orders and avoiding fraud. Incorrectly declined shoppers are quick to move to a competitor and hesitant to return to the declining merchant. Merchants who fall prey to fraudsters, on the other hand, pay many times over, shipping the goods, handling the chargeback and, as this survey shows, losing substantial future revenue from both prospective and established customers.

That double-edged sword means that merchants need to be as accurate as possible in making decisions on orders, while minimizing the impact on the customer experience. An accurate, instant solution will keep customers happy and merchants healthy now and in the future.

General Summary

Frequency of eCommerce purchases: While pundits and politicians tend to obsess over what the average American thinks, when it comes to consumer habits, there is no average American. In eCommerce, the biggest segment of American shoppers (39.4%) make online purchases roughly 2-to-3 times per month, while the second-largest segment (28.9%) shops online far more frequently, making purchases several times per week.

Diversity of Devices: Similarly, while laptops rule the digital roost (36.9%) for purchases overall, shoppers using smartphones (30%) aren’t too far behind. Meanwhile, among older shoppers, desktops and tablets are still heavily in the mix.

Shoppers do not suffer fools (or being fooled): One significant finding was that nearly one-third of shoppers in almost every segment abandoned a purchase entirely or went to a competitor after being wrongly declined. This means that all acquisition costs and efforts — whether it was through advertising, marketing, or social media outreach — were squandered by a false decline. And, in many cases, the false decline led a shopper directly to the competition.

Fraud is not just a one-time cost: Measuring fraud by lost revenue doesn’t fully account for the total costs incurred by an incident. Sadly, fraud is a cost that compounds. Our survey found that over 20% of shoppers who experienced credit card fraud blamed the merchant that approved the fraudulent transaction. More alarmingly, 49% of customers reported that they do not return to an online retailer after a fraud incident has taken place.

Online shoppers are a fickle lot: More than 4-in-5 Americans (84.1%) have started a purchase online and then stopped the process for various reasons, whether it’s an unexpected additional cost, an elaborate checkout, or just a second-guess.

Consumers often wait until the last minute: One place American consumers don’t second-guess themselves is when they’re under a deadline. Nearly a quarter (23.1%) have made a purchase on the day of a major holiday and nearly a third (30.3%) have bought a gift online while on the way to a birthday party.

How Merchants Are Affected

Perhaps the biggest conclusion from all this data is that while it’s never been easier to be a consumer, it’s never been harder to be a merchant. As shoppers take advantage of seemingly endless purchase and fulfillment options, the divergence from the traditional route imposes enormous new pressures on merchants.

To survive in the competitive, omnichannel eCommerce universe, a business not only has to offer a quality product, but also stay ahead of fraudsters, beat the competition, and constantly grow more efficient. At Riskified, we partner with more than 1,500 enterprise merchants, including several Fortune 500 companies, to do just that. Every day, we help safely process more than a million transactions and take the burdens of false declines, costly manual reviews, and fraud management out of the equation. We know more than a few ways to make the life and operations of a merchant better. With our consumer survey data in mind, here are just a few ideas.

Easing customer friction is key

Creating a seamless purchase journey is at the heart of what merchants can do to keep their customers loyal and active. Cart abandonment is a real problem, with 84% of respondents reporting that they abandoned a purchase before completion. While many consumers abandon their carts after deciding they don’t truly need to make the purchase, others disappear when they encounter hurdles in the payment process. We’ve included a few suggestions that could make the difference between a sale and a shutout. 

Optimize for mobile commerce: Our survey found that eCommerce sites that aren’t optimized for portable devices often lose shoppers, particularly younger consumers and pesky millennials. They like to shop when it suits them. Amazingly enough, over a third of all 18-to-38 year olds admitted to shopping while in the restroom.

Unfortunately, determining whether a mobile purchase is fraudulent presents technical challenges that differ from other channels. One key example: mobile shoppers encounter more false declines because of higher rates of AVS (address verification system) mismatches. “Also, outdated fraud solutions designed with only desktop shoppers and geographical data in mind are often thrown off by on-the-go shoppers. At Riskified, we’ve developed technology to quickly, smoothly, and safely verify legitimate mobile buyers, whether they are shopping online in Port-au-Prince or just a Port-a-Potty.

Safe, simple and secure checkouts help maximize revenue: Another fifth of the shoppers we surveyed ultimately decided against a purchase because the checkout process didn’t seem secure or trustworthy, and 20-to-30% of shoppers opted against completing a purchase after encountering a checkout process that seemed either too long or complicated. Lastly, 71.7% of all shoppers abandoned their carts after encountering unexpected fees at checkout. Offering clear, quick and simple checkout will help merchants and shoppers get across the finish line and complete the purchase.

Customers are always looking for a way to scrimp

Our survey revealed a nation of thrifty, bargain-hungry consumers, who check their balances often and look carefully for deals. Nearly one-third of American consumers (31.3%) reported to making a purchase online while in a store where the exact same product was sold.

Meanwhile, over a third of shoppers (37.5%) either “probably” or “definitely” created multiple email addresses to score discounts and promos. For a seller, the accumulation of these micro-scams eats away at precious revenue and marketing budgets designed to build new customer bases. To combat this, a merchant can try to outlaw multiple accounts. But before promo abuse can be stopped, a merchant has to be able to detect it first. At Riskified, we rely on behavioral analytics and dispatch our web beacon to suss out fraud large and small, even those John Q. Scammers scheming on referral and first-time discounts.

Our survey also found that, In some cases, shoppers (especially in wealthier households) disputing legitimate charges as fraudulent. This “Liar Buyer” fraud was reported in 48 percent of households with an annual income of $1M or more and 30 percent of households with an annual income of $500K – $999K. To counter this, Riskified recommends coordinating with a delivery provider that offers proof of delivery.

Fraud and false declines cause colossal damage

The most distressing news in our survey for merchants centers on the impact of fraud itself. We already know that fraud is expected to cost merchants over $500b in 2019, whether it’s from chargebacks, false declines, lost products, or hours squandered to manual review. In total, a jaw-dropping 49% of respondents said they had been the victim of credit card fraud—with the majority of consumers having experienced an incident by their 30s.

False declines, in addition to tagging merchants for 5.5% of their annual revenue, also present a major threat to customer loyalty. More than 50% of respondents who had been falsely declined were returning customers, often turning an unforced error into a lifetime loss. Following a decline, the survey found that roughly 42% of shoppers opted not try to place the order again, either giving up on the purchase (28%) or going directly to a competitor instead (14%).

In a marketplace increasingly built for nimble players and online upstarts, businesses can’t afford to say no to legitimate customers. Riskified is designed not only to scale with companies growing in size and expanding into new channels, but also to be on the forefront of whatever fraud or inefficiency is lurking around the corner.

With some adjustments and a reliable partner, the chaos of the fast-changing, fraud-riddled eCommerce ecosystem can be the least of a merchant’s worries. American consumers have responded resoundingly that they are seeking out businesses that understand their fears about fraud and can guarantee them a smooth purchase journey every single time. The only question left is: Are you ready?

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