13/10/2020 Risk management
Ethan Magnet

Blog 1: Credit agency benchmark in online commerce

How online shops can measure the quality of data service providers themselves

Successful online shops have one thing in common: they create customer satisfaction along the entire customer journey. An extremely critical area here is the checkout process. If you want to avoid shopping basket cancellations, you have to find the optimal mix of payment methods. Meanwhile, there is a multitude of payment methods available to online shoppers worldwide. Any online retailer who wants to turn shop visitors into loyal repeat customers needs a payment offer that is in line with the company strategy and also appeals to the target group. Experienced shop operators already know that purchase on account is still one of the most popular payment methods in Germany and has established itself particularly in the area of selection orders. This means that retailers can already noticeably reduce their drop-out rates by introducing the purchase on account alone. But this is only one of countless examples that show how important a balanced payment method control is. Because in principle:

  • Potential customers abandon the checkout process if they do not find their preferred payment methods.
  • A balanced range of payment methods has a significant influence on payment costs.
  • Cross-border online trade requires country-specific payment procedures.
  • The payment methods used have an influence on the returns rate.

Advantages and potential risks for online shops

Despite the many advantages of payment methods such as purchase on account, online merchants are also faced with potential risks. After all, every purchase carries the fundamental risk of non-payment and identity fraud. On the online shop side, it makes sense to first compare order data with existing information. This can be done relatively easy within the framework of an existing customer order. If characteristics such as open items, order history and negative payment behaviour are known, shop operators can already decide here which payment methods are made available to the customer. The situation is more difficult in the case of orders from new customers, for which no empirical values are usually available. It is not unusual for online merchants to fall back on information from credit agencies. This is because score values and negative characteristics help to make an initial risk assessment. However, data from credit agencies not only plays a role here, but can also be integrated beforehand to check the address and identity of the applicant.

Challenges for shop operators

Shop operators face the challenge of connecting the right provider in the checkout process. There is a multitude of service providers who offer different solutions depending on the application and industry. Online retailers must always ask themselves the following questions:

  • At what point should external information be integrated?
  • Which information is necessary? (B2B/B2C)
  • What is the granularity and quality of the data?
  • To what extent do providers differ in terms of the scores issued?
  • How is the technical integration structured?
  • What costs are involved?

How do I obtain my information as a shop operator?

There are some areas in which a direct comparison can be relatively difficult for online merchants. Credit agencies not only have different score systems, but also differ in the way they are calculated. Included evaluation criteria and their weightings differ depending on the provider. But it is not only here that there are differences that have to be taken into account on the part of the online shop. Attention should also be paid to how up-to-date and performant the information to be included is. After all, this can ultimately be the decisive factor in determining whether a potential customer places a final order or not. In principle, shop operators can assess after a certain time whether the data source used meets their own requirements, but a direct comparison is not yet possible.

Our solution approach for online shops

One solution for this is the proofitBOX from SHS VIVEON. The proofitBOX offers individually configurable payment method control for every online shop. It takes over the automated decision in several steps and integrates both internal shop data and external information. In the course of taking external data into account, proofitBOX enables the rapid and simple connection of over 50 data providers via “plug and play”. Particularly interesting for online shops: several providers can be integrated simultaneously, enabling a direct comparison under real conditions. The simple integration and immediate inclusion of external information in the shop process means that potential differences in the decision are immediately visible. Ultimately, it is up to the online retailer to decide on the basis of which information a decision should be made. However, parallel operation of different credit agencies does not only allow to find out which data source is more efficient. Rather, online shops can use the best of several suppliers and optimise their own credit agency strategy. The exclusive advantages of proofitBOX thus open the way for online shops to be able to integrate external data into the checkout process in a fail-safe and cost-oriented manner.