Many businesses today view customer experience as the number one means to increase revenue. While this is undeniably an important factor, the ‘experience’ customers now want has changed.
Since the e-commerce explosion in the late 1990s, the web has been a fertile ground for hackers and fraudsters targeting consumers with weak security defences. What is new, however, is that the majority of consumers now perceive fraud as an inevitable part of shopping online.
The daily news stories of hacking and data breaches have, in part, contributed to a shift in the mindsets of buyers around security. Research from Gartner shows cybersecurity spending has increased significantly across the world and is expected to reach $96 billion during 2018. It’s no surprise, thus, that as consumers become more educated about fraud than ever before, its prevention has escalated to being one of the top concerns for consumers when shopping online, according to Lost in Transaction, a research report by Paysafe.
The appetite for heightened security measures to protect personal data and transactions is clear: 60% of UK consumers are willing to accept any security measures needed to eradicate fraud, while two thirds (65%) are open to the introduction of more secure payment processes such as two-factor authentication, an initiative the Home Office is keen to put in place in an effort to reduce fraudulent transactions.
In contrast, less than a third (32%) of UK businesses believe their customers would tolerate heightened security, and 59% think longer verification processes increase their risk of losing customers. This view is not borne out by the figures which indicate that only one in ten consumers abandon online shopping carts due to payment security taking too long; indeed, according to 43% of UK consumers, the most significant driver of abandoned carts is their refusal to proceed due to hidden transaction fees and delivery charges.
Of those who do fall victim to fraud, many eventually recover their losses – 82% of credit card users, 74% of bank account users and 74% of digital wallet users. Across those three payment channels, however, more than one in five shoppers suffer permanent losses, often running into hundreds of pounds. Even those who are reimbursed are likely to have a negative view of the whole experience – not just the merchant involved but the payment method used too.
The future of payments
E-wallets, mobile payments and even cryptocurrencies have all experienced a surge in popularity with the UK public and healthy adoption by merchants. Given fraud prevention is such a priority for consumers, this is good news because the indications are that these new payment methods also make payments more secure than more traditional payment methods such as credit cards, debit cards and cheques. As well as e-wallets, mobile payments and cryptocurrencies, voice-activated systems such as Amazon’s Alexa and other biometric payments such as facial recognition are now more widely used, with four major banks already upgrading their apps to be more compatible with Apple’s facial recognition software.
As alternative payment methods such as these move beyond early adoption, new types of fraud will inevitably come into play. But how will merchants deal with the trade-off between balancing risk and revenue generation? Two thirds (69%) of UK businesses want to increase customer sign-ups and transaction volumes by reducing risk thresholds for ID verification – but how does that sit with 78% of companies wanting to produce more effective verification measures to prevent fraudulent transactions?
The challenge lies in implementation. In other words, how can merchants deploy robust security that is also cost-effective and has minimal impact on the customer experience? The answer is often thought to lie in innovations such as biometrics, social media and geo-location. And these will certainly help. However, they’re only one part of the equation.
Striking the right balance between convenience and security isn’t just about replacing older payment methods with new technologies. It’s important to understand new payment methods’ susceptibility to fraud before adoption. This is particularly relevant ahead of the implementation of GDPR this May, which can impose fines of up to 4% of total worldwide revenue or €20m for businesses that experience a breach. And by the same token, it’s equally important to decide whether to retire a particular payment method on the same grounds.
Fraud can be a daunting thing to a business of any size, but there are a few things that merchants can keep in mind to make sure they are offering the most secure experience to customers:
- Payment processors have multiple reporting tools and services that can help to identify fraudulent activity – this can include reported fraud data from card schemes, and dedicated fraud teams to assist in prevention. Businesses shouldn’t fear asking for assistance – after all, that’s what the experts are there for;
- New e-commerce merchants should always take a step back before leaping head-first into processing transactions – ensuring the right measures are in place from the start will help protect consumers and brand reputation;
- If a transaction doesn’t seem right, it generally isn’t. If multiple items are ordered while requesting a short delivery time, it’s often too good to be true. Be wary of behaviour that seems out of the norm;
- If a merchant can’t tell if a transaction is genuine, they should speak to their payment processor or acquirer – not only do they have the tools and resources mentioned previously, but they also have reams of data to search against. It is in their interest to keep fraud and chargebacks to a minimum as well; regular risk service meetings between a business and their payment processor is crucial. They can offer guidance on the latest trends, up-to-date fraud risks and general fraud advice that will help tackle a business’ own fraud and chargeback levels;
Finally, merchants shouldn’t be put off by a fraud or chargeback case – these are often the best ways to determine any weaknesses a business might have and where it can improve.
Ultimately, fraud prevention must also inform a business’ overall strategy. Two, five, ten years from now, the most successful merchants will be those who understand that fraud prevention isn’t just about their bottom line, but also about building a long-lasting relationship of trust with their customers.
Andrea Dunlop, CEO Acquiring & Card Solutions at Paysafe
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