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For Fraud And Trust, A Powerful Reminder That Retail Reality And Perception Are Light-Years Apart

Written by Evan Schuman
June 17th, 2013

An insurance company survey released Thursday (June 13) threw out new statistics about how consumers perceive fraud. One such stat—37 percent of U.S. shoppers said that they “have personally experienced fraudulent use of their personal information to make purchases without their consent.” At first glance, the figure seems extremely inflated, but it’s actually an interesting peek into the ways consumers today perceive fraud.

This has significance because shoppers don’t perceive fraud in the way that retailers do, so they react very differently to how retailers talk about breaches and security defenses. As for that stat, let’s start with the phrasing. The question was intended to ask whether the shopper had had fraud perpetrated on his/her personal payment card. But the question can also be interpreted as “have personal knowledge of.”

That means that if fraud happened to the shopper’s spouse, sibling, parent/child, neighbor, friend, classmate or even someone on a friend’s Facebook or Twitter list, then that shopper would say “yes, I have personally experienced” that kind of fraud. That is interpreting “personal” to mean “it happened to someone you know, as opposed to someone you read about online or in a newspaper.” Despite the absurdity of that—who reads newspapers anymore?—social sites today are affecting what people feel that they have personally experienced.

There are two other issues. First, the question gave no time limit. Had it said “within the prior three months” or “this year,” it would have been much stronger. As it was phrased, though, it’s asking for the shopper’s full lifetime. That alone could explain a lot of the number inflation.

But the more important question is what—in the shopper’s perception—constitutes a breach. Let’s say a major chain has been breached. Standard bank procedure these days is to change the numbers for all payment cards that had been recently used at—or on file with—that retailer. Given the number of recent breaches—and the millions of customers who collectively received such a notice—that’s a lot of shoppers who might think they had been personally breached.

But they need to ask the question: Did the bank detect any purchases that seemed fraudulent? If the answer is no, then that shopper did not personally experience fraudulent use of their personal information to make purchases without consent. At best, they were mildly inconvenienced because someone else suffered such fraud, but they didn’t.

As a practical matter, though, very few consumers would bother (or even know) to ask such a question. They hear their bank say that their card is being re-issued due to something fraud-like. If a survey asks whether they have personally experienced it, they’re almost certainly going to say yes.

For retailers, this is a very key point. A chain could have honestly believed—because it’s true—that only a tiny fraction of a percent of its shoppers had actually experienced fraud. But given the social and bank activities referenced above, it’s possible today that a very large percentage of your customers believe that they have personally suffered a fraud loss, even though they haven’t.

When you issue a fraud statement, remember that. When you choose how much space to give to fraud protections in a news release, an ad/commercial or Web event, remember that. If you were giving a speech about burglary preventive measures, would you phrase things differently if you knew you were addressing an audience in which 80 percent of people thought they had recently been burglarized?

There was another interesting tidbit from the survey, which was done for Allstate and The National Journal.


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