Influencer marketing and social commerce fraud risks

With the rise of social commerce and influencer marketing, e-commerce businesses are increasingly reliant on social media platforms for driving sales. This trend comes with ecommerce fraud risks, including the risk of false declines, which damage customer experience.

Among online shoppers age 18 or older in five countries, more than half placed orders on social media at least some of the time over the past 12 months, according to ClearSale’s most recent survey of consumer attitudes on e-commerce, fraud, and customer experience.

Many of these consumers use social media to follow influencers for their recommendations on clothing, beauty, home goods, electronics, and more. Nearly three-quarters of Gen Z online shoppers use social media to research purchasing decisions, in part because they tend to trust influencers more than other sources of information.

But social commerce transactions can be vulnerable to false declines – good orders rejected on suspicion of fraud. This happens by mistake, often due to rigid or poorly tuned fraud screening parameters.

False declines alienate customers, damage brand reputations, and represent lost revenue and customer lifetime value. Brands that want to make the most of their social commerce initiatives need strategies to prevent false declines without incurring higher rates of fraud.

Ecommerce fraud and false declines: Stats and impact

False declines are a particular risk during live shopping streams and during product drops, when demand is immediate. Order approval can quickly bog down, and shoppers are already online to vent frustration about any problems they encounter.

False declines are a more common experience than fraud for most consumers. In the consumer attitudes survey, 13% of online shoppers reported a fraud experience with social commerce during the past 12 months. During the same time, 27% experienced at least one decline while shopping online.

Both fraud and false declines have lasting impacts on brands, the survey found:

• 84% of shoppers will boycott a brand after a fraud experience on the brand’s website.
• 42% will boycott a brand after a false decline
• 34% will also complain about the brand on social media.

Influencers, naturally, are unlikely to want to work with brands that earn frequent complaints about rejected orders.

5 strategies for false decline prevention 

Preventing false declines and approving more good social orders creates a virtuous cycle. When transactions go smoothly, your customers get the items they want, which can increase their positive feelings about your brand and drive loyalty.

Successful purchases can also give them “bragging rights” if they’ve scooped up a hot item they want to show off to their followers, which creates buzz for your brand that can attract new customers. Here’s how to start and maintain the cycle:

1. Benchmark ecommerce fraud and false decline rates in each market, by platform. Understand the scope of the problem. If your fraud prevention tools don’t identify false declines–and many don’t–do a retrospective analysis of a few batches of past declined orders to see which were actually good. Use that data to calculate your own false decline benchmark. Breaking the data down by platform and geography will help you in the next step.
2. Tailor fraud screening rules for each market and platform. Consumers tend to have slightly different profiles from market to market, and your fraud scoring rules should reflect that. For example, in a more mature market, a brand-new email address and social account might be a bigger red flag for synthetic identity fraud. In an emerging market, however, scoring too heavily against new accounts could turn away many new potential customers. The same principle applies to platforms, as consumer and fraudster behavior may vary from one to the next.
3. Back up automated fraud scores with real-time expert review. Relying on automated decisioning often leads to false declines. A safer option is to send flagged orders for immediate expert review. This can identify good orders without increasing fraud rates, and it can prevent order-approval slowdowns that frustrate customers.
4. Follow up immediately on customer complaints. Your brand’s social media and customer service teams should have a defined process for responding to complaints shared by customers. They, and other potential customers, will be watching to see how you handle problems, so quick and appropriate resolutions are critical.
5. Track fraud, false decline, and customer complaint data over time. Ideally, you’ll see all three drop or remain low as you put the above steps into place. And if they don’t, you’ll have data you can analyze to identify the problem.

Eommerce fraud and social commerce trends 

Like all strategies, a brand’s approach to social commerce and order management needs continuous improvement to stay relevant in a fast-changing environment. This requires keeping up with the evolution of ecommerce payment fraud tactics and the social media landscape at large.

Payment fraudsters are always adapting their tactics to work around the barriers retailers place in their path. Now, with generative AI tools offering automated and customizable fraud as a service, criminals can experiment with different approaches faster, and on a wider scale.

For example, genAI enables realistic-looking imposter social accounts and websites for phishing, as well as synthetic identity creation that criminals can use to obtain credit to spend online and then disappear. Detecting these attacks requires AI tools that can match the pace and scope of AI-backed fraud without increasing false declines.

Brands should also keep an eye on news about social platforms. Specific platforms rise and fall in popularity over time, and events like new app debuts and even elections can change consumers’ social media habits.

This year in particular, brands need to keep an eye on what ByteDance will do with TikTok in the US now that the federal government has required it to sell its US operations or shut down. The outcome may require brands and influencers to migrate to other platforms with different social commerce practices and fraud-risk profiles.

Lock in social shopper loyalty

Social commerce can help brands grow their customer base, especially among younger consumers who look to influencers for recommendations on what to buy. Maintaining a good reputation among these discerning and vocal shoppers requires an excellent customer experience.

In a space where competition for attention and spending is fierce, reducing false declines can help your brand earn and keep influencers’ and customers’ loyalty.

Original article at: https://www.the-future-of-commerce.com/2024/06/06/ecommerce-fraud-risks-false-declines/

Frequently Asked Questions