This blog post underscores the importance of college-aged shoppers as a consumer demographic, and how merchants can better nurture these young customers and tap into a growing revenue stream, by better understanding fraud patterns found in these students' orders.
It’s no secret that millennials spend a lot of their money shopping, and unsurprisingly 67% of younger consumers prefer purchasing online. US college students alone have an estimated buying power of $523 billion, and with a lifetime of online shopping ahead of them, they are a highly lucrative eCommerce growth engine.
Yet many retailers fail to consider how their approach to fraud is preventing the maximization of profits from college-aged consumers. In this blog, I share some insights about their importance as a consumer demographic. Better understanding fraud patterns can assist merchants in nurturing these young customers and tapping into this safe revenue stream.
Sizing up college eCommerce
According to Riskified’s data, over 98% of all online orders for shipment to a US college address can be safely approved. This is higher than approval rates for orders from the general population, so orders from students are certainly safer overall.
Yet many merchants are still fearful of fraud and as a result are declining good orders made by students. The reasons vary: from an inability to recognize campus addresses or college IPs, to shopping behavior that is inherent to them, but can mislead fraud teams. Regardless of the reason, the result is an alarmingly high rate of false declines (and lost revenue).
Another consequence of inaccurate fraud prevention is a negative customer experience, which is particularly harmful given that millennial shoppers expect an unimpeded and frictionless online experience. Research has shown that they have a strong response to having their orders rejected, with 75% of younger shoppers changing their purchasing habits after being turned away by online retailers. An eCommerce merchant that fails to meet these expectations is more likely to lose opportunities for ongoing business.
Think twice before rejecting mismatches
So why are students so often falsely declined? Although AVS (address verification system) and shipping/billing address mismatches are generally considered indicative of potentially risky behaviour, amongst student orders these mismatches are especially common occurrences. More than 30% of student orders have a billing/shipping address mismatch!
Merchants need to be wary of rejecting student orders based exclusively on AVS or address mismatches. Riskified data indicates that student orders containing such mismatches can be approved 95.5% of the time, a rate almost 9% higher than orders with these mismatches from the general population. One explanation for this is that students routinely move between residential addresses when attending college, and often fail to update financial institutions of their change in personal details. Moreover, most banks outside of the US, UK, and Canada don’t support AVS purchases, which means that orders placed by overseas students will usually be missing AVS data.
Don’t decline your student revenue
Some merchants send Riskified orders they intend on declining. By analyzing this information we have gained important insight into the types of good orders repeatedly rejected over suspected fraud.
We have also been able to determine that orders in certain industries are considerably safer when placed by students. For instance, within fashion orders slated for decline, we are able to approve those placed by students at a 21% higher rate than orders placed by the general population.
When it comes to wrongly declined orders, foreign students attending North American universities are an important consumer group. Last year a record number of international students entered the US, making up close to 2 million higher -education admissions. These students have significant buying power and represent a relatively safe retail demographic for eCommerce merchants.
Students commonly use credit cards issued from their home countries to make online purchases in the US, which creates geographic mismatches that often alarm retailers. However, our data indicates, for example, that orders placed by Australian, Taiwanese or German credit card holders are 50% less likely to be fraudulent when they are being shipped to a US college address. We also safely approve merchants’ declined orders at an 8% higher rate when they’re placed by credit cards that belong to Chinese or Singaporean students studying in the US.
Capitalizing on student eCommerce orders
This year 20.4 million students are expected to enroll in North American colleges. Retailers need to start taking note of trends and patterns impacting this younger generation of consumers, and take a closer look at their fraud strategies.
To learn more about how our dynamic fraud prevention solution can help to maximize your online revenue, contact us at firstname.lastname@example.org