E-commerce vendor Radial is integrating new fraud prevention services from Chargebacks911 into its offerings.
Radial offers omnichannel services that connect a retailer’s online and offline assets, and handles such tasks as fulfillment, payments and fraud prevention, customer service and order management. Chargebacks911 helps retailers avoid chargebacks and challenge them if they do occur.
Chargebacks occur when a retailer refunds fraudulent transactions charged to consumers’ payment cards. Chargebacks not only involve the merchant’s direct loss, they also come with interchange fees that merchants pay to credit card issuers. Those costs rise as retailers experience more chargebacks.
“Fraudulent charges are a major strain for retailers challenged with maintaining margins into today’s competitive retail landscape,” says KC Fox, vice president, payments, tax and fraud for Radial. “Through our partnership with Chargebacks911, we are able to provide retailers with the safety net they need to maintain consumer trust and loyalty.”
Globally, consultancy Juniper Research estimates that retailers will lose $71 billion from fraudulent card not present (CNP) transactions over the next five years, with more than 75% of these transactions for the online purchase of physical goods. The remaining percentage of transactions is for online purchases of airline tickets and digital goods.
However, fraudulent chargeback rates from large corporations slightly decreased in the U.S. from 2015 to 2016, according to a recently released study, “Future Fraud: 3 Key Battlegrounds in 2018,” by digital marketing firm Juniper Research.
Juniper looked at fraudulent chargeback rates to show which geographic regions are more susceptible to online payment fraud. The U.S. ranked among the lowest of countries that Juniper tracked, with a chargeback rate of 0.47% in 2016, down from 0.50% in 2015, according to the study, released in June. Mexico and Brazil, however, were the highest on the index, with Mexico’s 2016 fraud chargeback rate at more than 2.5% and Brazil’s around 3.5% in 2016.
Other research finds that online retailers are spending 8.0% of their annual revenue to prevent and manage fraud, according to another recent study from research consulting firm Javelin Strategy and Research LLC.
The study “2017 Financial Impact of Fraud Study,” which fraud and payment provider Vesta Corp. sponsored, surveyed 497 e-commerce merchants that generated $1 million or more in annual sales within the past 12 months. Of these e-retailers, 155 sold only physical goods, 142 sold only digital goods or services, and 200 sold both. The average annual revenue of the retailers was $136.1 million.
Looking only at the retailers that sell physical goods, costs to manage fraud amounted to 7.7% of their annual revenue in the 12 months from June 2016-June 2017, compared with 6.0% in the comparable year period. For physical goods merchants, 21% of their operational costs in 2017 are devoted to fraud management, up from 15% in 2016.
The majority of the cost is not because of actual fraudulent purchases; most stems from the employees, software and technology the retailer invests in to manage fraud prevention. For example, to break down the 8.0% total that retailers spend, on average, in the past year, it looks like this:
- Fraud management represented 5.9% of the cost.
- Chargeback losses, or the actual cost of the item and the transaction fee paid to credit card companies, cost 0.6%.
- False positive losses, in which retailers decline to make a sale because they mistakenly flag it as fraud, cost 1.5% of the retailer’s annual revenue.
Radial is No. 19 in the 2018 Leading Vendors to the Top 1000 and has 260 clients in the Top 1000, Internet Retailer’s ranking of the leading North American retailers and brands by online sales.
In October, The Belgium national postal service bpost announced plans to buy Radial for $820 million. Radial launched in 2016 as a spin-off of the former eBay Enterprise.Favorite