Heroes in Business - Experian Identity Report with Chris Ryan, Senior Fraud Solutions Decision Analytics for Experian in North America

Episode Date: January 12, 2023

Experian Identity Report with Chris Ryan, Senior Fraud Solutions Decision Analytics for Experian in North America. Learn from the expert how online merchants can increase sales without taking on more risk and provide a frictionless shopping experience for good customers. Chris is interviewed by David Cogan host of the Eliances Heroes show and founder of Eliances entrepreneur community.  

Up in the sky, look, it's captivating, it's energizing, it's Eliance's Heroes. Eliance's is the destination for entrepreneurs, investors, CEOs, inventors, leaders, celebrities, and startups, where our heroes in business align. Now, here's your host flying in, David Kogan, founder of Eliance's. That's right. And you know what today is? It's the Experian Identity Report on the Eliance's Hero Show. We are bringing you special reports with the world's leading experts about the game-changing impact of identity and the need to use reliable data to make competent decisions

that safely accelerate customer engagement. And this week, we're joined by Chris Ryan. He is the Senior Fraud Solutions Consultant, Decision Analytics, North America at Experian. And again, of course, make sure that you go to Experian.com. That's E-X-P-E-R-I-A-N.com. Well, I got to tell you, Chris, we're all looking forward to learning about how online merchants can increase sales and really without taking on more risk and providing frictionless shopping experience for good customers. So with that and the rapid transformation that has taken place over

the past few years, what are some of the challenges online merchants are facing? So first, David, thanks a lot for having me on the show. I really enjoyed the opportunity to speak with you and to share some information with your listeners. So a great question to start off with, the challenges for online merchants. I'll start with the good news, right? Online commerce is a windfall, right? It's more efficient. It's more cost effective, especially in light of labor challenges and distribution challenges.

There are a lot of reasons to be excited about traction in the e-commerce space. And second, the pandemic drove a lot more of us to e-commerce a lot more frequently. And all indications are that that's not going to reverse. We're not going back to the store. We like shopping online. So there's reason for optimism there too. I think at this point, they're saying over 12% of all consumer spending is happening online and that number can only go up. But there are growing pains. And the biggest challenge we see for e-commerce and for online retail are the lost sales. So about 1% of all good eligible purchases are lost in the online shopping experience. And, you know, initially we say, well, 1% doesn't sound like a lot. And it's not compared to all the activity that's happening. But when you consider that the retail industry only grows about 4.3% a year,

a 1% lift or 1% opportunity is pretty significant. So there's some really good opportunities there to help the online retail community sort of clean up some of the challenges that are causing those lost sales. It's important to point out too that these lost sales, they're unique to the online experience, right? In-store purchases get approved about 97%. Online, they're unique to the online experience, right? In-store purchases get approved about 97%. Online, it's closer to 80. So there's a lot of room for upside there.

And a lot of this fallout, a lot of these lost sales result from processes that are needed to make sure that transactions are legitimate and that they're not fraudulent. And that kind of brings me to challenge number two, which is the activities that have to take place to verify transactions online. A partnership study we did with ITE Noverica earlier this year said that about 16% of online transactions are actually reviewed. And it costs about $10 a piece to review them. So if you do the math, it's like $1.60 for every online sale gets spent doing verification on those same sales. Right. Why is it, Chris, why is it though important to verify consumer identities and what makes it this such a difficult challenge to tackle? Well, it's a difficult challenge for a couple of reasons.

And first, it's important to do those verifications because the consumer identity is the missing link, right? The merchant can see the payment card. They know that it's open. They know that it's got adequate line. They know it's not past due. They know they can accept it. They know the information about what's being purchased. They know whether or not it's risky adequate line. They know that it's not past due. They know they can accept it. They know the information about what's being purchased. They know whether or not it's risky or whether or not it would be valuable for someone to fraudulently purchase and resell. But what we don't see in the retail industry online today

is a clear connection between the person presenting the card and the payment card itself. So a couple factors that make this hard to solve historically are first, the transaction as visible to the merchant comes from a single perspective, and that's the perspective of the card issuer. So whatever contact information, whatever address you have on file, that's the only basis for verification. And second, the data that the merchant gets is really limited. Predominantly, they get a zip code and that's it.

Does the person making the purchase provide a zip code that matches the one on the card? That's all there is. So the challenge we have to overcome in e-commerce is how do we get a better handle on better data through identity and connecting it to the payment card to make sure that those purchases can be easily approved and to eliminate all those review transactions that we talked about a moment ago. Boy, that's great information. And again, you're watching, listening to me, David Kogan, host of the Alliances Hero Show. Make sure that you go to Alliancer.com and click on Experian to hear past episodes. And again, that's E-L-I-A-N-C-E-R.com to go directly to the radio section

and click on the Experian. Because again, we have with us now Chris Ryan who is the senior fraud solutions consultant and decision analytics North America at Experian so go to experian.com e-x-p-e-r-i-a-n.com so Chris this is great information but how can Experian though help these online merchants really address all of this. It's a lot of stuff to address. Yeah, and it's interesting too, right? Because most businesses don't think of Experian when they're thinking of payment processing.

So what we've found through a partnership study we did earlier this year with IT in America was a great opportunity to launch a product that we call Experian Link. And what Experian Link does is it takes our perspective on consumer identity, which is not just from one lender, it's from a broad, broad set of very, very diverse data providers, right? We're used to seeing people who have multiple addresses. We know people move. We know people change their marital status.

There are these events that happen in everyday life that change your contact information that could disrupt an online purchase. And what we found was that experience view of that data, coupled with our view of who owns the card, gave us a gateway to say, hey, online merchant community, we can provide this data that will get you way beyond verifying if the zip code looks good in order to approve a purchase. So resolving identity is really at the heart of what we do at Experian, and that's really come in handy. And being able to couple that with payment card data was just a natural fit to create this product. And Chris, can you also to share the results, though, that your clients have had when using Experian Link? Yeah. So, you know, we mentioned the 16 percent review rate, right? That's what happens when the zip code provided by the card issuer doesn't match what's being provided on the purchase. It's a huge amount of fallout.

We're finding that with our more robust view of the consumer, when we can connect you to your second home, your office, other places you might direct a purchase, that we can get to, we cut that number in half, right out of the gate, right? We can cut 16% review rates down to eight. And in the process, we can save about half of those lost sales, right? Adding that level of confidence that today takes a lot of money and a lot of resources to review and investigate and make decisions. We're saying, just say yes. Well, thank you again, Chris. You help online merchants increase sales without taking on more risk and provide a frictionless shopping experience for good customers.

This has been the Experian Identity Report on the Alliances Hero Show. Be sure to go check out Experian to learn more at exprian.com. This has been David Kogan with alliances.com.