The retail industry is facing a tough test in 2023, and there are many signs that it will be another challenging year for many businesses, challenges such as:
Four key challenges that will determine the success or failure of businesses in 2023 in the UK and the European Union have been identified in the ecommerce report for 2023 by fraud protection platform Signifyd.
Payments have always been a critical part of the customer journey, and merchants who take a strategic approach to payments are seeing the benefits, even in today’s challenging economic climate.
Consumers are increasingly embracing a variety of payment methods as they adapt to the new era of ecommerce. According to Signifyd’s report, buy now, pay later (BNPL) has seen a 68% increase in usage in the last year, while debit and credit cards are becoming less popular. PayPal and Apple Pay have also seen significant growth, with usage increasing by 274% and 70% respectively.
The increasing popularity of a variety of payment methods creates an urgency for retailers to diversify their accepted payment methods portfolio. Retailers need to accommodate the fact that one customer might use a different payment option depending on the situation.
Merchants who do not offer a variety of payment methods risk losing customers. A survey by UK consultancy Merchant Advice Service found that 20% of consumers will abandon their purchase if their preferred payment method is not available. This means that merchants in the European Economic Area (EEA) are losing an estimated £1.8 billion per year due to a lack of payment options.
To ensure success, retailers need to be aware of the payment methods that are trending among their target audience and integrate them into their checkout process.
Merchants are being encouraged to use data throughout the entire customer journey to improve their risk management and approve more legitimate orders. According to research by CMSPI, merchants lost £21.7 billion (€25 billion) per year in 2021 due to false declines and £1.9 billion (€2.2 billion) to fraud.
Data is key to using machine learning to improve authorisation rates, drive loyalty, and understand customers better. These are all essential aspects of the ecommerce game, especially as Strong Customer Authentication (SCA) is causing friction in the checkout experience and leading to cart abandonment.
The COVID-19 pandemic accelerated the shift to online shopping, and with it came an increase in online returns. According to Mintel, 38% of customers became more comfortable with the idea of returning goods during the pandemic.
However, this comes at a higher cost for retailers, who are expecting lower annual revenue due to the increase in returns during the cost-of-living crisis.
While some of these returns are legitimate, others are fraudulent. As the checkout process is becoming more difficult to penetrate due to Strong Customer Authentication (SCA), fraudsters are finding other ways to exploit the online customer journey. Some of these methods include:
While it is important to protect against fraudulent returns, it is also important not to deter legitimate customers. The key is to find a balance between the two. This can be done by having return-friendly policies for legitimate customers and by building barriers against those who would take advantage of the system.
Global e-commerce is poised for exponential growth despite current economic headwinds. Online sales have continued to grow rapidly, increasing by 33% year-over-year in 2021, according to a report by Signifyd. While shoppers are returning to in-store shopping, which is almost back to pre-pandemic levels, the online shopping space has solidified its place in the retail market.
The rapid growth of global e-commerce presents a vast opportunity for businesses to expand internationally and reach a wider customer base, which can lead to increased revenue. In fact, cross-border sales are up 45% this year compared to pre-pandemic figures, according to Signifyd.
Customers appreciate the convenience of online shopping and are looking for foreign goods at the best possible price. This is a great opportunity for businesses to capitalise on this demand and give their business a boost, especially if they have reached a plateau in their home market.
Expanding globally can be challenging, and it is important to carefully consider if this is the right move for your business. Some of the things you need to do to prepare for cross-border expansion include localising your content, diversifying your payment methods, and becoming familiar with local fraud trends.
Each market is unique, so it is important to do your research, use data, and ask yourself the right questions before expanding into a new market. These questions should include why you are expanding into the market, where you want to expand, and what you are willing to risk.
If you’re considering expanding internationally, now is the time to do it. According to Signifyd’s ecommerce report, 85% of UK consumers are already shopping cross-border. Foreign markets are hungry for new and innovative products, and you can gain a competitive advantage by being an early mover.
The enforcement of Strong Customer Authentication (SCA) was the biggest change in online payments since 2007. It was designed to reduce fraud in the wake of the booming e-commerce sales and create a safer online shopping environment. However, the two-factor authentication that comes with SCA has had an unintended consequence: it has caused friction in the customer journey, leading to frustration.
Customers today expect a fast and seamless online shopping experience. Any disruption, no matter how small, can lead to a negative customer experience. In fact, a report by Signifyd found that 71% of UK consumers rate unsuccessful checkout experiences due to SCA as five or higher on a frustration scale of one to ten.
As a result, customers are likely to leave their shopping carts unpurchased, decide not to shop with a particular retailer again, or even worse, switch to the retailer’s competitors.
Although the enforcement of SCA has been met with some challenges in the UK and the European Union, the experience has not been the same across the region. Some countries have experienced less friction than others, but what is it that sets them apart?
3D Secure, the EMVCo’s SCA authentication protocol, is the main factor that differentiates countries’ experiences with SCA enforcement. Some countries are still using the original and outdated version of 3D Secure, which is causing significant transaction declines. For example, Signifyd’s analysis shows that 42% of Italy’s approved orders were met with significant friction due to the 3D Secure version 1 review, and 22% were rejected and abandoned.
This means that merchants need to implement an SCA-friendly strategy that takes into account exemptions and out-of-scope transactions. This will help to reduce the friction caused by SCA and improve the customer experience.
2023 is shaping up to be another great year for e-commerce. While there are many challenges ahead, merchants who have the right tools and a strong strategy will be able to overcome them and thrive.