Online marketplaces come in many different varieties. Some are B2B, while others are B2C. Some offer products, while others offer services. Some are sales-based, while others are auction-based. Some are one-sided, while others are two- or even three-sided in nature and function.
Despite this variety, all online marketplaces share an important characteristic: They’re designed to facilitate transactions between two or more parties who may or may not know each other.
Facilitating these transactions earns the marketplace its fees. It’s also how the business grows. Buyers who have a pleasant experience with a marketplace refer their friends to become new buyers, attracting new sellers who want to take advantage of the distribution channel. And when more sellers join, the variety of products on the platform also grows — attracting even more new buyers.
This means anything that might put these transactions at risk — like fraud — can seriously hurt the business. The question then becomes: How can an online marketplace reduce the risk of fraud that might damage user trust and scare buyers and sellers off of the platform?
Enter trust and safety.
Below, we define trust and safety in the context of online marketplaces and briefly discuss the different risks businesses need to be aware of. We also offer a number of strategies you can use to mitigate the risk of fraud on your platform and create a safer environment for users.
What is trust and safety?
In the world of ecommerce, trust and safety refers to the policies, programs, and strategies a business puts in place to promote a safe, trusted environment for its users.
For online marketplaces, trust and safety means taking steps that reduce the risk of marketplace fraud so buyers and sellers will want to engage with the platform. The specific strategies leveraged will vary from marketplace to marketplace, but will often involve some combination of user verification, reverification, two-factor authentication, activity monitoring, link analysis, and manual review (discussed in more detail below).
It’s worth noting that trust and safety doesn’t just apply to marketplaces. Social media sites, online dating services, digital health providers, and e-learning platforms can all benefit from taking steps to make their platforms safer and more trustworthy for their users.
Threats to trust and safety
Anything that threatens the sanctity of a transaction — or your users’ experience — is a potential threat to trust and safety.
This includes various types of marketplace fraud and auction fraud, which can take place on both the buyer-side and seller-side of the transaction. Fake or duplicate accounts, listing fraud, false advertising, spoofed transactions, promotion schemes, payment fraud, and chargeback fraud can all call into question the security of the transactions that occur on your platform.
Likewise, other activities outside of fraud can also prove detrimental to the trust and safety of your marketplace. Harassment from other users, spamming, cyberstalking, catfishing, doxxing, and other forms of toxic behavior can all make your users feel unsafe and potentially drive them away.
Who is responsible for trust and safety?
Trust and safety typically falls under the purview of a business’s aptly-named trust and safety (T&S) team, which is responsible for all tasks related to creating a safe environment on your platform.
Depending on the size and maturity of your business, the T&S team can be as small as a single employee performing multiple roles or encompass dozens or even hundreds of employees with more nuanced and specialized responsibilities. It’s not uncommon for a trust and safety team to include trust and safety officers, compliance officers, fraud specialists, data analysts, intelligence agents, content moderators, legal resources, and even law enforcement liaisons for the most serious of cases.
In many cases, the trust and safety team will need to operate cross-departmentally with other teams, such as product, engineering, customer success, and others.
How can marketplaces mitigate risk?
There are many steps you can take to mitigate the risks discussed above. Some of the most impactful include:
Creating a clear set of user guidelines
In order to enforce your company’s policies and rules, those rules must first be spelled out — in the form of buyer and seller guidelines. These guidelines should outline what activities and items are and aren’t allowed on your platform. They should also detail the repercussions users should expect if they are found to have broken any of the rules and provide potentially defrauded users a pathway for reporting fraud.
Implementing identity verification during onboarding
Identity verification helps to promote trust in your platform in a number of ways.
First, it can help you identify fraudsters before they gain access to your platform and can even act as a deterrent that prevents risk-averse fraudsters from wanting to target your marketplace. If fraud does occur, the information collected during onboarding provides investigators a path to “follow the money” back to the perpetrators. Identity verification also lays the groundwork for many of the strategies discussed below, such as reverification and link analysis, which are only possible once certain information has been collected from the user.
All of this means less fraud on your platform and a healthier ecosystem of accounts and product listings for your users.
Identity verification can also be a tool that directly helps you build trust in the minds of your users. If buyers know that all other users had to prove their identities in the same way that they did, it can create a higher baseline level of trust vs a platform that doesn’t require verification.
Learn about new seller IDV requirements under the INFORM Act.
Enforcing two-factor authentication for all accounts
Fraud on your platform can come in a lot of shapes, not just as the examples of marketplace fraud discussed above. Another important type of fraud you need to be aware of is account takeover (ATO) fraud, which is when a bad actor gains access to an account that isn’t theirs.
Once they’ve compromised an account, they can use it to engage in a variety of nefarious activities — from harassing other users to posting fake reviews to creating fake item listings or making illegitimate purchases.
Enforcing two-factor authentication for all users adds an extra layer of security to the log-in process, making it more difficult for a bad actor to gain access to an account that isn’t theirs. According to research by Google, this one simple strategy can be effective at preventing 100% of automated bot hacking attempts, 99% of bulk phishing attempts, and 66% of other targeted attacks.
Leveraging reverification during high-risk moments
If you have identity verification processes in place, you can also combat account takeover fraud by reverifying a user’s identity at high-risk or suspicious moments that may be indicative of fraud. Some examples may include when a user:
- Changes their payment details, log-in details, physical address, or other contact information
- Attempts a much larger purchase than usual
- Engages in a large number of purchases in a short period of time
Reverification through selfie verification is a low-friction strategy that lets you protect your users without forcing them to jump through hoops.
Performing link analysis on your user base
Through link analysis, it’s possible to evaluate your user database for signs of fraud. It works by looking for accounts that are linked by suspicious details, and can be highly effective in uncovering potential fraud rings that are already present on your platform — which you can then flag, block, or monitor.
What counts as a “suspicious detail” will vary depending on who your users are, but common examples that can be uncovered through link analysis include accounts that share the same:
- Contact information
- Physical address
- Payment details
- IP address
- Device fingerprint
- Browser fingerprint
Pairing automation with manual review
Many businesses are increasingly turning to automation for their fraud detection and mitigation needs. After all, automation makes it easier for your business to do more with less and can be instrumental in successfully scaling your anti-fraud strategy.
But 100% automation may not actually be the cure-all it seems to be. That’s because, while automation has its strengths, it also has its weaknesses. Just as automation spots risk signals that a human might miss, a human might spot risk signals that automation might miss.
With this in mind, for many companies the goal shouldn’t be full automation, but achieving the right ratio of automation to manual review. Because manual review takes time, the more efficient these processes can be, the better.
There’s no one-size-fits-all solution
While trust and safety is a concern for all online marketplaces, there’s no universal solution that will apply to all businesses and in all cases. Your trust and safety policies need to be tailored to the realities of your business. The industries you serve, regions you operate in, regulations you are subject to, and expectations of your users should all inform your processes.
Persona’s comprehensive suite of customizable identity tools was built for this challenge. From identity verification to supplemental reports to manual review, link analysis, and more, Persona can help you solve the problem of trust and safety once and for all.
Interested in learning more? Start for free or get a custom demo today.
