Ending Friction in the Online Experience
As a result of the 2020 pandemic many consumers have turned to online shopping for everything from purchasing groceries and household staples to buying a car from another private party. As a result, alternative payment providers have been overwhelmed by an influx of new users and are struggling to balance regulatory requirements with a seamless customer experience.
Buyers and sellers alike are reporting delays and frustration with online purchases mistakenly flagged as potentially criminal transactions. I experienced this first-hand recently when I attempted to sell a vehicle on a popular online marketplace site. Right away I was contacted by an out-of-state buyer who wanted to complete the transaction quickly and pick up the vehicle over the weekend. Since the banks weren’t open on the weekend, cash payment was not an option for the buyer, so we turned to a peer-to-peer payments provider to process the transaction.
While I was initially thankful to be able to complete the transaction on a Sunday using this platform, in the long run I found it created more problems than solutions. Given the value of the transaction, it was immediately flagged for review, and both the buyer and I were contacted to confirm the legitimacy of the transaction. After providing government ID, proof of my original purchase of the vehicle from the dealer, the bill of sale for the sale to the new buyer, a manufacturer’s certificate of origin, and a payoff letter from the previous lienholder, I was informed that it would still be 7-10 business days before they would release the buyer’s payment funds to my account. All the documentation had to be manually verified, and then the purchaser still had wait several days to go back into the payment platform’s system to re-certify the payment and the authenticity of the transaction. The purchaser had already taken possession of the vehicle, and I was left waiting nearly two weeks for funds to materialize!
In another instance, an online seller was flagged for potential money laundering when he attempted to sell items from his late father’s estate. During his lifetime, the father had accumulated a significant number of rare and collectible items and his son, who had recently become the executor of the estate had established a new bank account for the proceeds from the liquidation of the estate. The son did not have receipts for purchasing the items he was attempting to sell and had no way to establish their provenance. Due to the lack of documentation as to how and when the items for sale were acquired, combined with the recently created bank account, his transactions were immediately flagged as high-risk.
Purchasers have also reported having their legitimate transactions flagged as suspicious. In this case, the seller is notified that the payment has been put under review and they are instructed to not ship the purchased items until the payment clears, often for a week or longer.
Unfortunately these are common scenarios for consumers and businesses who may be new to online selling or alternative payments platforms. They may be triggered because they have not previously bought or sold with frequency or are conducting a transaction of a larger size than they may have previously, and payment can be held up indefinitely for larger transactions. This makes for a less-than ideal customer experience, creating headaches for customers versus providing newfound convenience.
This month and next, online sales are expected to grow a staggering 33% over 2019 to a record $189 billion. It is anticipated that Cyber Monday alone will bring in $12.7 billion for online retailers, a 35% increase over last year.1
With the major shift to digital-first commerce during the pandemic, and the promise of increased online shopping during the holiday season, digital marketplaces and alternative payments providers have an opportunity to thrive and attract a significant number of new users, if they can create a welcoming and efficient customer experience.
Could these high-friction scenarios be managed differently?
By combining newly-available technology with intelligent, automated fraud and financial crime solutions in a multi-layered approach, online marketplaces and alternative payments providers could more quickly clear legitimate consumers while also detecting more suspicious entities. Digital transactions call for digital solutions, so start by harnessing the power of a global digital identity network that can detect potentially nefarious entities in near real time based on their previous online behaviors versus relying strictly on a transaction threshold alone. Consider investing in additional technology, such as a document authentication solution and customized reporting and due diligence tools that can help automate processes that are historically very manual and disruptive to the customer experience. Finally, ensure that the data sources that you are using to underpin these processes are the most comprehensive available and are continuously updated to reflect the most recent global risk realities.
Contact us today to learn more about how you can efficiently respond to complex compliance requirements without sacrificing customer experience.
1. Surge in online holiday shopping will pack 2 years of growth into one season. CNBC https://www.cnbc.com/2020/10/28/online-holiday-sales-to-surge-33percent-to-189-billion-adobe.html