Integrating management of customer value and risk in e-commerce

Increasing turnover in e-commerce is inherently linked with a rising risk of payment fraud. Online retailers (e-tailers) aiming for a company-wide value orientation should actively manage this risk. However, by applying current approaches such as adding an overall risk premium to average prices or restricting accepted payment methods, extra turnover potentials remain unconsidered since customer-specific value and risk properties are neglected. In this contribution, a novel approach for transaction-specific customer management for e-tailers is proposed, taking customer-specific risk and turnover potential into consideration-fully automated and in real time. Therefore, risk-turnover combinations are calculated representing risk and value potentials of a single customer as well as risks associated with different payment methods. Based on these risk-turnover combinations, a new approach for an optimal, customer-and transaction-specific selection of payment methods becomes possible. Finally, calculated risk-adjusted prices aim to realize a given product base price and can be directly used for customer risk management or for adapting an e-tailer's major marketing or pricing strategy.