Trying to win new users or customers is becoming an increasingly fraud-ridden business. With ad fraud now an $8.2bn problem that continues to dominate headlines, trust in digital marketing methods is eroding at the same pace. Yet suppose your message does get past the clickbots and reaches new users. And suppose that these users respond positively to your message. How worried would you be to discover that a huge number of those new sign-ups are not real users at all, but bogus accounts belonging to fraudsters, whose intent is to do nothing other than steal from your business?
A growing problem that is getting worse
Fraudsters are not a new problem. Every business allows a little margin for bad debts and there will always be people out there buying our products or using our services whose intent is not good. But what has changed in recent years is the emergence of a number of confluent factors that are creating a fraudster’s paradise:
1. VC-backed growth frenzy: for many B2C companies the only measure that really matters is the growth graph. This creates an environment with the top line is the only line and focus on the bottom line, that is the business of actually getting paid by legitimate customers, is not the focus.
2. Frictionless customer journey: removing barriers to purchase (to fuel the growth) trumps all other considerations. The result is that checks and processes that might well reduce fraud but slow sign-ups are removed.This is especially true for mobile commerce. Users need fewer and fewer details to sign up - and guess who just loves that…
3. The ease of committing fraud: millions of card details are online, with CVV codes and addresses in place, the cost is minimal, and the consequences of being caught are mere inconvenience rather than prosecution.
Bigger than you think.
For a growing business, that first advertisement on television or a celebrity endorsement on twitter feels like a significant growth moment. Of course it is, but without a filter on who is buying your service or goods the size of the the potential fraud influx can be huge. As a new product or service gains popularity, and you’re managing an influx of new customers anyway, fraudsters too will have identified a new desirable service that is ripe for exploitation, especially if the only fraud detection in place is provided by your payment gateway.
Our own analysis shows that a mature business with a fraud solution in place would expect to drive fraud down to less than 0.5% at its peak. But in the period between kickoff and maturity, that is during the high growth period, the level of fraud can reach 5-9% of all transactions and represent an even larger slice of revenue (as fraudsters tend to spend more).
While this has to be tackled over time, one of the bitterest pills to swallow first for a marketing team is correcting the growth figures to accommodate the fact that a percentage of users were bogus and that a significant percentage of revenue had been fraud. But ultimately for a business to succeed it needs to know its user growth is real and needs to find out quickly.
Whose problem is fraud?
In growth-focused organisations there is a temptation to simply ignore the bad news as it takes some time for the chargebacks to occur and the false growth to impact. However, just as bogus clicks on an ad campaign quickly erode trust so too will marketing campaigns that pull in bogus users and threaten the organisation’s ability to accept card payments. It’s much smarter to invest in ways to ensure that those users who sign up are valid and likely to deliver revenue and not headaches to an organisation. But how?
Delivering Real ROI
Being able to assess the contribution marketing makes to the business is essential. But if your tools for measuring campaign effectiveness are unable to capture and account for indicators like fraud, this can significantly impact on the effectiveness of your marketing efforts.
It’s a little counter-intuitive to expect a marketer to spearhead the introduction of a fraud product that is usually associated with operations and finance. However it is in the interests of growth-focused teams to ensure that legitimate customers can sign up without undue delay and to have their transactions accepted. This means smart technology like machine learning and graph networks should be adopted to detect anomalies and then see connections between users that should not be there. It is much smarter for marketing to get on the front foot and ensure the right systems are in place so that the customers being added are real, and that real customers can purchase without interruption.
By Gerry Carr, Chief Marketing Officer at Ravelin
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