Impact, Growth & Opportunity of KYC on eCommerce With It's Challenges
Wondering how the rise of KYC has impacted eCommerce? Click here to know the different aspects to KYC, risks associated & find out how it's impact on eCommerce affects you!
Globally, eCommerce—defined as the sale and purchase of goods and services over the internet on any digital device—is a phenomenon that has transformed the lives of businesses of all sizes, in all industries, as well as of consumers across the world. Examples range from the behemoth called Amazon to small mom-and-pop stores serving local communities.
The global eCommerce industry spending was close to $5 trillion in 2020. What is driving this phenomenal growth of the eCommerce business?
The proliferation of internet access and mobile devices and a strong logistics ecosystem has already been driving growth. The global pandemic has further accelerated the shopper movement to eCommerce in both: business-to-business (B2B) and consumer retail.
While B2B eCommerce growth has been fuelled by work-from-home during the pandemic, consumer eCommerce has been fuelled by the convenience of shopping online during lockdowns. As we enter 2022, the trend has become the norm, with many shoppers not returning to offline shopping, even for traditionally in-person categories such as furniture and groceries.
With eCommerce Growth and Opportunity, Comes Challenges and Risk
While eCommerce growth spells great opportunity, it also presents challenges: online fraud, cart abandonments, increasing competition and skyrocketing customer expectations. eCommerce retailers need to set up the right processes, infrastructure and technology to proactively address these oncoming challenges.
What Are The Challenges and Risks For Online Ecommerce Today?
The Risks To Ecommerce Retailers
The biggest and most pressing challenges for online retailers are online fraud, identity theft and false reviews. This report shows that global payments fraud has tripled from $9.84 billion in 2011 to $32.39 billion in 2020.
Online fraud: Credit card frauds are the biggest challenge for online retailers, over 50% as per a US FTC study. A 2018 study shows that card-not-present (CNP) fraud is 81% more likely to occur than “card-present” in-store credit card fraud.
Identity theft: This occurs when hackers steal personal data, such as credit card and address details and make transactions on someone else’s card. It is the second most prevalent type of fraud for the eCommerce industry. When wronged customers ask for a chargeback, it is not only financially damaging but also shakes the confidence of authentic customers.
Cash-on-delivery or CoD fraud: Not paying for products upon delivery and New Account fraud (NAF) are both growing threats. Almost half of all online frauds occur with accounts that have been opened in the last 48 hours.
The onus of online safety and careful disclosure of credit card details cannot be on customers alone. Credible eCommerce retailers need to step up and invest in precautionary measures to protect themselves and legitimate online shoppers.
The Risks to Online Shoppers
Just as e-Retailers need to trust customers, customers also want to trust the online retailers they buy from. However, even today, 21% of consumers are afraid their credit card data will be stolen and 19% believe their confidential data may be misused. Two specific ways eCommerce businesses can help customers feel safer are as follows:
Ensure verified reviews: Verified online reviews are more credible and boost customer confidence and sales.
Provide a friction-free yet thorough account opening experience: This way, customers feel that their details will be secure with the retailer.
How Can Online Retailers Protect Themselves and Their Customers Against Online Fraud?
The first and most proactive step an online retailer can take against fraud, identity theft, COD, NAF and fake reviewer scams is to put a robust identity verification process in place. Identity verification, also known as KYC, or Know Your Customer, is how organizations can verify and authenticate customer data and credentials before onboarding them as customers.
eKYC - The process of executing the KYC process digitally is the ideal solution for eCommerce because it enables a digital, contactless and secure way to verify customer identity while also minimizing friction to the consumers and online shoppers themselves.
eKYC has seen tremendous acceptance in industries that need to mandatorily collect and manage sensitive customer data, such as healthcare, telecom and banking and financial services.
Now, the global online eCommerce industry is also waking up to the possibilities and advantages of eKYC to both the business and the consumers.
The Impact of eKYC on eCommerce
Why does eKYC matter to eCommerce and etailers? Aside from the protection it offers to the business against fraud, it also has a huge impact on building brand reputation and trust—key elements to acquiring and retaining customers in a competitive eCommerce market.
- eKYC enables faster, safer acquisition, onboarding and retention of legitimate customers
First-time shoppers are key to the acquisition goals of online shopping sites. However, retailers wary of fraudulent transactions end up wrongly rejecting legitimate customers due to suspected new account fraud (NAF). Even returning customers sometimes get rejected when they use a new device, leading to more false declines. A robust eKYC solution implemented at the time of customer onboarding will not only drive up safe acquisition but will protect the business from NAF, credit card fraud and identity theft during the lifetime of the customer.
- eKYC offers a smoother, friction-free and secure customer experience
By enabling online retailers to offer seamless and secure onboarding and safer ongoing services across devices and channels, eKYC can boost sales and customer experience scores. When customers trust the brand and feel safe and secure, they shop more, recommend it more and spend more per interaction. In these competitive times, eKYC also gives eCommerce vendors real customer data to focus their resources on serving the needs of legitimate customers.
Data Security through AI-enabled KYC
The advent of newer technologies has enabled companies to carry out digital KYC seamlessly in such short time durations that truly eliminates the hassle of traditional KYC, which required multiple steps and in-person visits.
Video KYC allows a company to authenticate a person’s identity remotely on a video call.
Documents are verified, liveness checks done and user location detected - all while client and official are connected on a video call.
The Reserve Bank of India approved this process of VKYC in January 2020. It also mandates that all businesses must adhere to proper cybersecurity regulations and keep security measures in place.
The use of AI-enabled solutions for user KYC not only enhances data security but also makes client onboarding much easier for both parties involved.
Digital KYC or eKYC—a transformative solution that protects eCommerce retailers from fraud and losses—is easy to implement with as little disruption to your current process as possible. Online KYC or eKYC is the best way to secure business interests in eCommerce as well as to protect the interests of legitimate customers.
The key is to incorporate identity verification solutions during the sign-up process. For a win-win, find the right technology partner who can help balance the safety needs of your business and the customer experience expectations of your shoppers.