What Fighting Digital Commerce Fraud has in Common with Maslow’s Hierarchy of Needs 

Online fraud cost digital commerce merchants $27 billion in 2021, so it’s no surprise that retailers have redoubled their focus on eliminating these threats. Fraudsters are getting more sophisticated and are using a variety of tactics, such as identity theft, chargeback fraud, “silent” fraud, account takeovers and “pharming,” complicating organizations’ ability to detect these incidents.

Yet the reality is that by focusing on fraud first, companies are focusing on the wrong priority. The situation is akin to Maslow’s Hierarchy of Needs, a model proposed by an American psychologist in 1943 to describe how human beings find motivation, grow and flourish. In Abraham Maslow’s model, subsequently depicted as a pyramid, humans must get basic needs met, such as physiological, safety and love needs, before they can tackle higher-level purposes such as cognitive, aesthetic and self-actualization goals.

Three Ways to Fight Fraud Organically While Building Customer Relationships 

So, how does Maslow’s pyramid relate to online fraud? Retailers are overly focused on quelling fraud at the expense of building customer relationships — which is their most foundational need for survival, growth and long-term success. As a result, retailers that rely on rule-based and manual review-intensive models are declining legitimate customers and their transactions, ultimately leaving millions of potential revenue and customer lifetime value on the table.

Here’s how to address that problem and move up Maslow’s pyramid to achieve true retail transcendence as a thriving, profitable and customer-focused business. 


1. Open the door to new customers: Digital commerce is a ruthlessly competitive industry. Traditional retailers with digital commerce operations compete head-to-head with online retailers for demanding customers. Media articles abound about the skyrocketing marketing dollars required to woo new consumers. As just one example, Chewy was a pandemic winner, but the company spent more than half a billion dollars marketing to consumers in 2021.

With marketing and advertising costs, discounts, promotions, free shipping, fast deliveries and high returns, leaving money on the digital commerce table isn’t an option. Holding on to customers is a high priority. Retailers need to be able to fine-tune fraud decisions to understand who customers and fraudsters are, even when they’re brand-new to the retailer’s business.

Forter has found that new shoppers are five to seven times more likely than repeat customers to have that first purchase declined when merchants use rules-based fraud solutions, because these customers are usually wrongfully considered to be higher risk due to their non-existent history with the retailer. And some 40% of declined shoppers will never try that site again. Solving the problem of false declines means that companies like Chewy, which is spending up to $505 to acquire each new customer, can actually approve and keep them when they’re placing an order for the first time.

2. Embrace your customers’ complex lives: Complex or relatively new online identities don’t always (or even usually) equate to fraud. Take for example digital nomads who live and work from multiple places around the world. They may log in in one country, maintain a billing zip code in a second geography and seek to ship goods to a third location. In addition, these global wanderers often use a VPN for remote access as they work their way around the world, inadvertently creating the impression of “cloaking” their online behavior.

This level of complexity often signals fraud to traditional detection tools. But, in reality, these individuals are usually legitimate customers who just have a complex online footprint. Similarly, consumers who use prepaid cards may be declined more frequently than those who use debit or credit cards, because prepaid cards are at higher risk for chargeback fraud.

Online fraud detection platforms must be able to identify when complex, evolving digital commerce scenarios are expected and trustworthy and when they are not. By so doing, they can empower merchants to build stronger, longer-lasting relationships with them.

3. Unlock innovation to delight your customers: Retail experiences such as BOPIS (buy online, pick up in-store) and BORIS (buy online, return in-store) have opened up the door to more fraud. Forter’s Fraud Attack Index found that BOPIS fraud attacks increased by 55% in 2020. The report says that fraudsters typically use the victim’s correct billing and personal details, ask for in-store pickup and then appear in-store while assuming the identity of their victim. Similarly, returns abuse can happen when fraudsters return stolen merchandise or exploit promotions and returns policies for personal gain.

Retail innovation such as BOPIS and BORIS can only flourish when merchants have the immediate ability to determine whether transactions are trustworthy, and they can make these decisions at speed and with scale. By tapping fraud detection and prevention solutions that use data, automation and AI, retailers can accomplish this goal. They can also simultaneously meet their customers in any and every channel that they use and provide an end-to-end experience that delights them.

Fight Fraud Within the Context of Building Customer Relationships

Companies are spending significant sums to fight fraud. A Merchant Risk Council survey found that firms were spending an average of 10% of their revenues and using two to three techniques and third-party data to combat payment fraud. 

However, the best way to reduce fraud losses is to find the right solution that allows merchants to redouble their focus on delighting and building trust with customers. By doing so, retailers can ascend Maslow’s Hierarchy of Needs, building a thriving business with brand fans who spend more across each purchase and the customer lifecycle. 

Andrea Montero is Director of Product Management at Forter, a leader in ecommerce fraud prevention.

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