Dynamic (or surge) pricing is the automated adjustment of prices according to fluctuations in demand. Typically, the price is increased as demand goes up. Dynamic pricing has been the norm in industries such as travel, accommodation, and ride sharing for some time, and more recently has become a key revenue optimisation tool in sectors such e-commerce, energy, and entertainment.
If you’ve been following my latest articles, you’ll know just how big the global challenge of false positives has become. And, how false positives are only going to get worse as the use of fraud mitigation AI systems become more deeply integrated into the online payments experience.
So, what does dynamic pricing and false positive have to do with each other? In short, they are the recipe for an absolute disaster of a customer experience. I’ll use an example of buying air travel to explain…
False positives are a CX nightmare for the travel sector
Booking air travel online can take hours. Searching for flights across multiple booking platforms, comparing fares, aligning times and dates with accommodation - it’s not a 5-minute process. In fact, according to TravelPerk, the average traveller spends over 5-hours consuming online travel content to seek inspiration and plan their trip.
Just imagine you have spent hours online creating the perfect itinerary. All your flights are in your cart, you have the perfect dates, you’re happy with the fare, and you’re all set to pay and confirm your trip. You get to the checkout, enter your card details, and the booking platform rejects your payment. And not because you have insufficient funds – it’s been rejected because the AI the booking platform uses isn’t certain enough that it’s actually you making the booking.
Now, in this scenario, you have two choices – you can get on the phone or a chat bot, wait for some untold length of time to speak to a human and work through the payment. Or, you can go to another booking platform, complete your search and find the flights all over again, and see if they’ll accept your money.
I would hedge my bets that most people would take option two. Now heavily invested in this process, most people just want to get their holiday booked. The issue here is that the person already has their flights in a cart with another booking platform. The airline(s) know this – but what they don’t know is that the same person is now booking yet another itinerary. So, it looks like a surge in demand for these flights. And of course, the cost of the fares is going to increase. The would-be traveller is now having to pay MORE for the same itinerary they just tried, and failed, to book. Through no fault of their own.
Neither scenario is a positive experience. Hours wasted. Much frustration. And undoubtedly, you’re going to tell everyone you know what a terrible experience you had. And all because the AI incorrectly deduced that this was a fraudulent transaction, when in fact it was not.
Sizing the problem
I’ll go out on a limb here and say that fraud combatting AI could be more of a hindrance than a help in this type of scenario. We know that false positives are caused by AI incorrectly identifying a legitimate transaction as fraudulent, and that this is ten times more costly than online payments fraud, not to mention the significant reputational damage this would cause for the booking platform. With around 80% of consumers booking their travel online and a global travel sector worth $667.55 billion in 2023, this is not a small issue.
The solution is in the way we pay
Having just written a page or so on a pretty big problem, I am happy to say that there is a solution to this. And it’s brilliantly simple. Change the way we pay online.
Fraud, false positives, and the terrible customer experience scenario I just outlined could all be solved or significantly minimised if we made online payments more failsafe. I’ll break it down:
Online payments are ‘card-not-present’ transactions. That is, there is no categoric way toconfirm the person typing in the card details is the card holder.
Fraud combatting AI only exists because the rate of card-not-present fraud is increasing exponentially.
False positives only exist because the fraud combatting AI often mislabels legitimate transactions.
You know where none of these problems exist? In-store, where payments by card are called ‘card present’ because there is a categoric way to prove the person presenting the card is the cardholder. It’s called a PIN.
So, if we can make online payments card-present payments by having the consumer enter their PIN as part of the online payment process, then we have no need for fraud combatting AI, which means there will be no false positives, far less fraud, and the terrible CX scenario becomes a thing of the past.
Yes, you are right in thinking this sounds too simple. Where’s the catch?
The short answer is that there is no catch outside of having the technology to enable card present payments over the internet. And until recently, it didn’t exist. But it does now. And it’s ready to go.
Card Present over Internet (CPoI)
Burbank’s CPoI enables tap and PIN payments over the internet using the consumer’s device. The process is fast, simple, and secure.
Tap and PIN is the globally familiar, simple, and universally trusted way to pay. But better yet, there are zero false positives, less chargebacks, lower processing fees, and simpler payments infrastructure. It is, simply, the best way to pay online.
If you’re interested in talking to us more about CPoI and how it can revolutionise your online payments process, reach out to the Burbank team today.
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