“I would say Riskified changed our lives.”
Eileen Shulock, VP eCommerce at Kirna Zabête
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Ecommerce is a critical cog in the European economy, and growing in importance. In 2017, European online sales grew 11%, and in 2018 they will grow another 13%resulting in an annual volume of $602 billion Euros.

But there’s evidence that this online market has the potential for even more robust growth. According to a 2017 study, fewer than 40% of European merchants sell via a digital channel. Moreover, 74% cater only to their own country, in their own language, meaning there is massive untapped potential in cross-border sales. Another major factor holding back growth in European eCommerce is one many merchants aren’t even aware of: the unusually high rates of false declines in this market.

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We’ve written extensively in this blog about the scope and cost of false declines. Riskified estimates fear of fraud leads merchants to decline good orders at a total value equivalent to 5.5% of their annual online revenue. But false declines are only one leak in the payment funnel – most merchants don’t realize that around 10% of orders placed at their online store are declined even before they have a chance to capture funds.

In 2019, the $48B paid in chargebacks, and the roughly $187B that will be lost to orders falsely declined at checkout, will be dwarfed by the $340B of potential revenue that fails payment authorization.

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The holiday season is widely recognized as one of the biggest online shopping periods of the year. eCommerce revenue from the upcoming year-end sales is predicted to be 13% higher than 2017. For merchants, it’s an incredible opportunity to bolster annual revenue over the course of just a month or two, and to dramatically grow their customer base.

But managing the influx in traffic and shoppers is no easy task. With large order volumes on the horizon, merchants need to make sure their fraud operations can handle massive amounts of transactions without suffering fulfillment delays, false declines, or costly chargebacks. Reviewing data from previous years is crucial to forecasting and ensuring preparedness, and our new guide offers a novel approach to analyzing holiday performance.

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Any good captain will tell you it’s impossible to acquire customers in a turbulent industry like travel without a good flight plan. For airlines and online travel agencies (OTAs), that’s where loyalty and frequent flyer programs, alliances and partnerships, fare sales and social outreach all come into play.

But Facebook posts, low fares, and pretzel-filled lounges can only do so much to make thin margins work against sky-high acquisition costs. To be a truly efficient travel business, the hard work isn’t just about identifying, attracting and converting the right shoppers into paying customers. It’s also about having a reliable, scalable way to quickly tell the difference between a valid shopper and a bad actor. After all, what good is a forecast of clear skies if the right people can’t come along for the ride?

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Millennials — the first generation of digitally native consumers, or those born between 1980 and 2000 — are now the most populous group of consumers in the world. Their purchasing power is estimated to exceed $13 trillion worldwide by 2020, according to the Brookings Institute. US millennials are expected to spend the most on holiday shopping this year, spending as much as four times more than baby boomers.

As retailers overhaul their omnichannel offerings to appeal to these consumers’ needs, we have noticed a critical blind spot in their approach: imprecise and outdated fraud prevention strategies that fail to accommodate millennials’ unique lifestyle and shopping behavior, creating friction during checkout.

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Suppose you’re a seventeen year old who wants to buy a bottle of vodka from the liquor store. The problem, of course, is that you’re underage, and the cashier is definitely going to ask for some ID. So you have two ways to beat the system: buy/steal the ID of someone who looks a bit like you, or create your own fake ID from scratch.

Fraudsters who want to log in to your eCommerce site face a similar choice. In an Account Takeover (ATO), a fraudster obtains account credentials and poses as an existing loyal customer. Our guide to ATO covered these attacks in-depth. But there are also fraud MOs that involve creating fake accounts from scratch. As with ATO attacks, the fallout from these fake account scams goes well beyond just financial losses – It can hurt your brand, your reputation with banks, and your ability to provide loyalty benefits to good customers.

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It’s official: Riskified is one of the best places to work in New York City!

Fortune unveiled their top workplaces list for 2018, and we joined the small and medium businesses group. The rankings are based on employee surveys conducted and analyzed by Great Place to Work, and a total of 50 NYC-based companies are chosen.

“We’re extremely excited to be named one of the best places to work in New York,” said Eido Gal, our co-founder and CEO. “From day one we made employee satisfaction a priority, and this recognition shows that we’re on the right track. We hope that this announcement will help us continue to grow here in New York, but more than anything we’re thrilled to see that so many colleagues are happy to be part of the Riskified team.”

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U.S. state and local governments now have the right to claim billions of dollars of your hard-earned revenue. On June 21, 2018 the Supreme Court decided to take away a decades-old shield that exempted online retailers from collecting sales tax in states where they have no physical presence.

The exact nuts and bolts of enforcement have yet to be worked out. It may be another 60 days before details emerge on how states will amend existing laws or enact new ones, but it’s certain to change the face of eCommerce. Which begs the question – how does this impact retailers? Here’s how:

  • Merchants that have already been collecting state taxes: Good news – your competitors will now have to do the same. The playing field just got leveled.
  • Merchants with brick-and-mortar stores: Even better news – you’ve been collecting everywhere you had a physical presence. Your competitors that only operated virtual stores now share that same sales tax liability.
  • Merchant that haven’t been collecting: Uh oh. Your expenses are about to go up.
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It has mostly flown under the radar – so don’t worry if this is new to you – but the EU recently adopted a new regulation regarding privacy called GDPR.

I kid.

Clearly the EU’s GDPR (General Data Protection Regulation) has been all over the news for years now, and we’ve heard a huge amount about it since its May 25th implementation. You probably even received a number of emails about updates to security and privacy policies. Like many companies, Riskified also took some major steps to ensure GDPR compliance. We thought we’d lay out those details in a blog post so that consumers and merchants alike can better understand how we process data and what we do to keep that data secure.

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The Merchant Risk Council’s 2017 Global Fraud Survey showed that the average online store declined 2.6% of all incoming orders due to fear of fraud, including 3.1% of all orders worth over $100. For a $25 million business, this means rejecting orders worth more than $600,000 annually. But the true cost of declines is actually far higher than just the lost sales revenue.

To understand the full cost of declines, one must consider all the factors involved in a holistic risk management approach – which includes the sales and marketing investment that goes to waste when a good order is declined. Whether online media, SEM, or social media campaigns, eCommerce companies invest considerable funds and energy in customer acquisition and retention – bringing users to the website, bringing them to checkout, and trying to ensure they become repeat customers.

Expedia Inc, for example, invested $5.3 billion in marketing in 2017, equatable to more than 50% of the entire group’s annual revenue. If their decline rate was average, one could say 2.6% of that marketing budget, or ~$140 million was lost due to fear of fraud. Add the lost lifetime revenue from good customers whose order was wrongly rejected, and you start getting an idea of how costly declines can be.

In this post, we share our approach to calculating the true impact of declines on your business.

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