Blog Startup & Dev

what-to-do-business-data-breach2

E-Commerce Fraud : What Kind Of Offers ?

Benoît David

From Ogone’s autumn 2013 white paper, e-tailers wish to have a anti-fraud tool that would be nonintrusive to the customer, user friendly, while staying cost effective. But a good anti-fraud offer can also include a legal aspect which could assist the e-tailer for the juridical formalities (suing of fraudsters, 3D-S insurance), as well as it can insure the e-tailer against potential chargebacks, which is the cost of fraud in terms of due repayments from the e-tailer to his bank. For more information on the cost of fraud for e-tailers, please have a look on our previous article : E-Commerce Fraud: What Kind Of Challenges? Thus in order to understand the anti e-commerce fraud market organization, we have to study and compare the different types of offers in that market.
The study will be divided in three parts : price, features and market presence. Here are the studied offers: FraudAgencyFraudGeniusFraudLabs ProFIA-NET CertissimOgone Fraud ExpertPayOne,  RiskifiedSECUVADSignifyd and Subuno. Among those offers, three of them are developed by a Payment Service Provider (PSP), which represents a comparative advantage in terms of means but which can also mean a high cost.

Price Comparison (FIA-net, Ogone, Secuvad, Subuno)

In all cases the price is gradually adapted to the number of monthly transactions in the e-commerce. A refund is then done by the fraud hunter depending on the total amount of transactions. In most of the cases, though, the offer is divided into differentiated packages including more features for larger e-commerces. In that case there is no refund: the price stays the same, or higher, and is justified by the inclusion of advanced features in the offer (example: SECUVAD:  Pack Starter/Pack Sérénité). Last but not least: a free offer is available in the majority of studied cases, provided that the e-commerce’s monhtly/total amount of transactions is below a given threshold. The setup is, on the other hand, always requires a fixed fee. Prices are either fixed (FraudLabsSignifydSubuno), per transaction(FraudgeniusRiskifiedSECUVAD), or are simply not given and require a quotation (FIA-NET,FraudAgencyOgonePayOne).

Hence the following chart :

tableauprix

The presented prices come from the cheapest offer of each fraud hunter (free offer excluded). Every fixed price has been converted into a price per transaction for purposes of comparison. As for the case of Riskified: the price being given as a percentage taken from each transaction, the price is given with the average basket value in Europe in 2014: $107,5 (source: Fevad, 1st semester 2014). The three PSPs are supposed to have higher fees, for they generally consist in highly developed offers adapted to large e-commerce enterprises.

Feature Comparison: 3DS, specific knowledge and risk assurance

Every e-commerce fraud hunters studied here propose a command scoring feature based on their fraudulous potential. Scoring is based on a more or less detailed list of factors (customer’s IP ? Where was the paying card emitted ? etc.). If PSPs (except FIA-NET) take in charge the 3D-S process, it is interesting to see that alternatives such as FraudGenius exist: it sends a message on the customer’s mobile phone (+$0,20 per transaction verified this way), thus verifying itself on a third channel if the transaction is legitimate. Alas it is no sinecure, as the fraudster can simply give the number of a prepayed card and avoid this secure check without any trouble. An other alternative, FIA-NET’s, proposes to take in charge customer checking on highly scored (thus risky) commands: by phone, e-mail or mail. Yet we can then imagine the ponderosity of such a verification in e-business context, where a initiated purchase can be so easily given up.

By using a relatively simple points weighted attribution system for each feature, the following chart is obtained:
tableaufonctions

This chart makes it able to see the great tendencies in terms of features among the ten studied anti e-commerce fraud offers. First the leading group: while Ogone offers scoring, expertise on risky commands, 3D-S, customer check and chargebacks insurance, SECUVAD does not include 3D-S but an interesting legal side, whereas FIA-NET regroups Ogone‘s features without 3D-S. The main body of the list is on the other hand composed of rather simply featured offers that have one particularly innovative feature: chargebacks insurance (Riskified, Signifyd), 3D-S or similar (Fraudgenius, PayOne). Whereas the three last ones only have a scoring feature with nothing more.

Market Shares Comparison: Fraudlabs and Subuno climb the ladder

Market shares comparison is based on to variables: the number of languages in which the offer is available and the number e-commerce frameworks those offers have developed an integrated module. It is thus more a comparison on the potential presence on the market, rather than on a real share distribution.

tableaumache

Ogone, available in 7 languages and developed for PrestashopShopifyMagento, as well as a large number of other e-commerce platforms more or less important. FraudAgency though is only available in German, on Prestashop and Magento. Therefore Ogone, for example, is potentially more present on the anti e-commerce fraud market than FraudAgency. We thus see that Subuno and Fraudlabs Pro, both having less features among the studied offers, are yet placed at the third place ex aequo regarding their respective potential market share. This shows that they have adopted a certain strategy on the market, that we will try to explain in the following part.

How do these offers behave themselves on the market ?

In order to compare the strategies of e-commerce fraud hunters on the market, we can compare the potential presence on the market of each of them in terms of their respective features. We thus obtain 4 different profiles.

  • Niche Players: those who have a few features to offer and content with their market segment.
  • Conquerors: those who privilege the acquisition of new market shares rather than developing new features.
  • Experts: those who privilege the development of new features rather than acquiring new market shares.
  • Leaders: those whose presence on the market is overriding and whose features are numerous and complex.

Offers with asterisk ( * ) are PSPs.

tableaupartssurfonctions

We can directly observe that the Niche Player profile is most represented in the sample of studied offers. This can be partly explained by a will of actors on the market to realize a simple solution (scoring), where few investment is needed, for a precized market segment (German for FraudAgencyand PayOne, French for FraudGenius, English for Fraudlabs, Signifyd and Subuno) in order to be useful for small e-commerces, majoritarian, whose investment capacities in terms of anti fraud fight are limited to the bare necessities. On the contrary, Ogone the giant, with its numerous features and its omnipresence on the market is more adapted for larger online commerce websites, which need a both complex and costly system in order to effectively fight against fraud. At last, the Conqueror offers a solution containing one salient feature that will be promoted on as many market segments as possible: this is more adapted to e-tailers whose needs are specific, whereas the Expert offers a complete solution at competitive price in order to compete with Niche Players in a given market segment.

Seeking for an e-commerce offer adapted to the e-tailer’s needs

This study allow us to conclude that the overrepresentation of niche players on the market shows an excess of offer compared to demand. The market, still expanding, has not yet reached the stage where the balance of powers finds an equilibrium, where anti-fraud offers must make efforts in order to meet the specific needs of each e-commerce, would it be a petty one. Thus we notice that an affordable, both universal and adaptable e-commerce offer is actually missing. What about you ? What kind of antifraud offer would suit you best ?

Sources :
http://payment-services.ingenico.com/~/media/files/ogone%20white%20paper_a4_008.pdf

https://fraud.agency/
https://www.fraudgenius.com/
http://www.fraudlabspro.com/
http://www.fia-net-group.com/les-services-du-groupe-fia-net/lutte-contre-la-fraude/
http://payment-services.ingenico.com/be/fr/solutions-paiement-en-ligne/paiement-securise-internet-prevention-des-fraudes
http://www.payone.de/en/products/protect/
http://www.riskified.com/
https://signifyd.com/
http://www.subuno.com/

Tags: , , , , , , , , , , , , ,

1 Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>