Across every industry, the customer's digital experience is proving to be a competitive differentiator and a business disruptor. In the Financial Services sector, this has been the driving force behind several FinTechs expanding their market presence. As of Q4 2018, in the personal lending space, Fintech's market share has overtaken that of traditional banks. Global venture capital investment in Fintech has been one of the highest and growing at a rapid pace, even in a regulated industry like Financial Services. The retail industry is a classic example of how a digitally native business model (like Amazon) powers more than 50% of U.S. online e-commerce, referred to by some as the "Retail Apocalypse." Between 2012 to 2019 over 12,000 retail stores have closed due to over-expansion, rising rents, operating costs, and the shift in consumer shopping patterns to e-commerce. This shift in consumer spending and has left several retailers filing significantly scaling back or filing for bankrupty, such as Sears Holding, Toys R Us, Forever 21, Barneys New York, and most recently, the famed Neiman Marcus. During the same period, Amazon was generating the majority of e-commerce retail sales.
Organizations have been investing heavily in digital transformation initiatives to be more modern customer-friendly, while also investing in cloud technologies, driving record growth of cloud revenue for vendors like AWS, Microsoft, and Google. Most start-ups now disrupting nearly every industry are born in the cloud. IDC estimates global spend on digital transformation to be $6.8 trillion by 2023: 87% of companies think digital will disrupt their industries and have adopted a digital-first strategy, and more than 50% of companies believe improving customer experience and customer satisfaction is key to start digital transformation.
COVID has accelerated the digital shift, by as much as five years or more according to some estimates. In a digital-first world accelerated by COVID-19, organizations who have a well thought out strategy are thriving and those who de-prioritized these initiatives are getting left behind. E-commerce sales are estimated to grow to $848 billion in 2021, advanced by 3 years from 2024 due to COVID-19. In 2020, Best Buy saw the largest YoY (year-on-year) e-commerce sales growth at 105%, followed by Target (103%) and Kroger (79%). Organizations that have pivoted will thrive in the future. Over time, customers have been influenced by Amazon’s digital shopping experience, and they now expect similar experiences from their retailers, banks, airlines, and all manners of daily online interactions. Amazon, Google, Netflix and similar companies have permeated customers' daily lives and have consistently raised the bar of customer expectations. Likewise, the pandemic has furthered customers' dislike around waiting in checkout lines. “Amazon Go” augmented the trend of frictionless checkout not just in the online world, but also in brick and mortar stores as well. As an example, Starbucks opened its first pickup-only store format in Manhattan in Nov. 2019. Clearly, we are accelerating towards a frictionless future.
While the understanding and focus on digital customer experience is critical for growth, the cost of friction to business is estimated to be $200 billion in U.S. market and US $325 billion in the APAC market. From our vantage point, we see that some 10% of consumers hard fail on login, despite that the vast majority of this segment is made up of good returning users. About 15% have some form of login friction but eventually do manage to log in. The cost-related ramifications of these scenarios range from:
This friction is generally imposed due to intended security or fraud measures but certainly also impacts business outcomes. As noted, the vast majority of the customers who face friction are good returning customers. It is the inability to identify them that has led to this friction (and compiling losses for business). This contrasts with most organizations' current mission to provide a better digital customer experiences—putting them on the backfoot as related to business performance and competitors.
At F5, via our Shape Recognize offering, we can solve these issues by recognizing users, leveraging comprehensive data around good users and fraudsters. Across our network, we manage over 1 billion monthly active users and mitigate over 1 billion daily automated attacks from fraudsters. With these insights, we can identify an overwhelming majority of good returning customers and automatically reauthenticate legitimate customers, using behavioral biometrics, deep analytics, artificial intelligence, and other sophisticated data means. The experience we provide is akin to what customers might find through Amazon, Gmail, and Paypal. And we've vetted our approach with several clients, performing A/B tests, subjecting randomly assigned “eligible” users in test groups to the agreed-upon session extension parameters (e.g., 15/30/45 days) and the rest in a control group with current "business as usual" methods (e.g., 30 mins) for session time out. Across our client installs, we observed the following benefits:
Providing a great digital customer experience is a business imperative. The digital customer experience is disrupting businesses across every industry, and particularly in Retail. An organization spending millions of dollars on digital transformation initiatives cannot afford to impose friction on good customers. Today's customers are used to fast, easy, and, in many cases, contactless experiences, and they expect the same from every brand they interact with. A frictionless future is safe, possible, what customers expect, and ultimately the only way forward. Let us help you along the journey toward it.