Security

For Retailers, Fraud Concerns Increase with BOPIS Popularity

Merchants must invest in fraud prevention, but not ruin the customer experience with buying online and picking up in stores, experts warn.

BizTech Staff

As “buy online, pickup in store” — or BOPIS — becomes more popular with consumers, concerns about fraud are on the rise.

According to Emilie Grunzweig, director for insights, e-commerce and fraud, for Israeli software company Riskified, merchants were being told a year ago that their BOPIS sales “were extremely safe” and that fraud associated with the practice was dwarfed by that of regular e-commerce orders.

“That’s no longer the case,” Grunzweig told several media outlets. “We’re seeing effective rates of fraud in BOPIS for some of our merchants that are 250 percent higher than they were in the last year.”

Shoppers Love BOPIS Option

According to Signifyd, a San Jose, Calif.-based technology company that provides fraud protection to online retailers, 90 percent of consumers want BOPIS as an option. In a survey by Signifyd of 250 professionals representing retailers with at least $100 million in annual revenue, 83.2 percent of respondents said BOPIS represented at least 20 percent of their retailers’ online revenue. Signifyd also found that 40.4 percent of retailers are concerned about increasing BOPIS fraud, and 37.6 percent have doubts about their BOPIS practices.

BOPIS orders accounted for 21 to 30 percent of online revenue among 28.8 percent of respondents to the Signifyd survey. Another 28.4 percent said internet orders accounted for 11 to 20 percent of online sales. The survey also found that 37.6 percent of respondents offer BOPIS with the hope that shoppers will make additional purchases, while 31.6 percent want to keep up with their competitors. Another 15.6 percent of respondents said they offer BOPIS to attract millennial shoppers.

“You’ve got a millennial demographic, which is more and more of the purchasing power today,” said Matthew Leach, a vice president at NTT Data Services, in a Signifyd blog post. “They want to shop differently. They also expect a certain degree of customer experience, especially from digital transactions.”

NTT, a business technology company based in Texas, studied BOPIS at 15 of the nation’s largest retailers.

Carl Boutet, a Montreal-based retail strategist, told Signifyd that every retailer should offer BOPIS. He had a blunt assessment for those that don’t:

“If you can’t do this, then you shouldn’t be in e-commerce. And if you’re not in e-commerce, you shouldn’t be in retail.”

Training, ID Protect Retailers from Fraud

But not to worry, Grunzweig said. Retailers have several options to protect themselves from BOPIS fraud.

“We strongly believe that the best approach here is to implement really smart fraud prevention for the online order,” she said. “Good systems will look at the shopper’s patterns — including prior purchases, behavior on site and links across other orders — and prevent the fraud before the order is placed. This way, merchants are much better equipped to protect their bottom line while providing their shoppers with a great experience and differentiating themselves from online-only retailers.”

Stefan Nandzik, vice president for marketing at Signifyd, said retailers should train their store associates to look for warning signs with online orders that are being picked up in the store. He also suggested that merchants require a government-issued ID for in-store pickups.

“Some of the most cautious retailers require both a photo ID and the credit card used for the purchase, while at the same time prohibiting anyone but the customer who placed the order from picking up the order,” Nandzik told the website FierceRetail.

Don't Go Overboard and Ruin the Shopping Experience

He cautioned that while all are sensible precautions, together they can create frustration for customers.

“But, in the end, it’s balance,” he said, “which is why adding machine components to the transaction decision allows store associates to focus more on customer service while also feeling good about securing BOPIS and the convenience it adds.”

Grunzweig concurred. “Consumers choose BOPIS so that they can get their stuff quickly, easily, and on their own terms. If merchants go so far toward fraud prevention that they ruin the experience, then they’ve lost their differentiator. We recommend letting technology do the work to provide a great customer experience that’s safe for the merchant.”