Fraud can have a significant impact on businesses. Some estimates suggest the cost bleeds into billions of dollars and affects the bottom line of virtually every company.
For instance, affiliate marketing scams may comprise nearly 45% of affiliate marketing revenue, according to Anura.
Naturally, fraud can also have a tremendous impact on customer trust and loyalty. Fraudsters are notorious for engaging in many malicious activities, including chargebacks, data security breaches to steal money, and compromising online payment systems.
Of course, when this occurs, it can lead to significant damage. Fraud not only causes direct financial losses to businesses but also harms your reputation and credibility — even if you are not the one guilty of committing the crime. Customers who lose money when shopping with you feel angry toward the fraudster and your brand for not doing more to protect them. They are far more likely to leave negative reviews and tell other people how terrible your company is via word of mouth.
What Happens To Customer Loyalty When Companies Breach Customers’ Trust?
According to a Javelin Strategy & Research study, around a third of consumers who experience fraud stop doing business with the relevant company. Other studies by Kount put that figure even higher, suggesting that as many as 6 in 7 stop doing business entirely.
And it doesn’t take much. Simple credit card fraud is usually all that’s required for companies to go off consumers’ radars. From their perspective, it’s just too risky to shop with you;
How To Prevent Fraud And Retain Customer Trust And Loyalty
Given these statistics, it’s clear fraud can have a tremendous impact on customer trust and loyalty. Therefore, it’s essential companies work toward minimizing risk and ensuring they don’t become scammers’ victims.
But what should you do, exactly?
Some industry experts suggest that businesses invest in technologies enabling them to prevent and detect fraudulent activities early. Options include:
- Artificial intelligence and machine learning-based systems
- Software that performs behavioral analytics
- Biometric authentication that blocks fraud in real-time
- Robust data protection policies
Combined, these tactics and techniques help to stop fraudsters from misusing customer data. A combination of approaches is more likely to be successful than just one or two.
However, companies also need to look at the other end of the equation and ask whether there is anything they can do to educate their customers about the risk of fraud. Even with the most sophisticated systems, people can fall prey to phishing scams and other techniques to deprive them of valuable financial details.
People who use your business should understand they are never too small to become a victim. Fraudsters know that most people have at least some money that’s worth chasing after. And they will do so if they detect any form of weakness or believe you might be susceptible.
In summary, firms need to take a multi-pronged approach to customer security. Companies should educate their customers while addressing potential weaknesses in their front and back end. The long-term payoffs are likely to be significant in the form of enhanced branding.
