Report reveals merchant focus on convenience at the expense of security is a false economy
Houston, Texas – October 19, 2017 – More than half (59 percent) of Americans think fraud is an inevitable part of shopping online, according to new research conducted by Paysafe, a leading global payments provider. In a wake-up call for online business, the Lost in Transaction report contradicts the widely-held belief that consumers value convenience and experience over security when shopping online. Instead, 58 percent of consumers are willing to accept any security measures needed to eradicate fraud, while nearly three quarters (71 percent) are open to the introduction of more secure payment processes such as two-factor authentication.
By contrast, only 39 percent of US businesses believe their customers would favour tighter security, and two thirds (67 percent) think longer verification processes increase their risk of losing customers. In fact, only 12 percent of American consumers abandon online shopping carts due to payment security taking too long; while the most significant driver of abandoned carts is hidden transaction fees and delivery charges, according to 37 percent of consumers.
One further key issue highlighted by the report is the trade-off merchants face when balancing risk and revenue generation. 67 percent of businesses surveyed want to increase customer sign-ups and transaction volumes by reducing risk thresholds for ID verification. But 76 percent also want to produce more effective verification measures to reduce fraudulent transactions, a potential conflict with their revenue ambitions.
These conflicting views exist even though transactional fraud is a top priority in the boardroom, according to three quarters of businesses (73 percent). In addition, 47 percent of merchants say that over 5 percent of their transactions are fraudulent. In this context, 8 out of 10 businesses expect to increase spend on fraud in the next 12 – 24 months, typically by at least 11 percent.
Commenting on the research, Todd Linden, CEO of Paysafe Payment Processing, North America, Paysafe stated: “For years consumers have had to overcome the apprehension that businesses know too much about them – from shoe sizes to food preferences. But as the payment world evolves, it is this knowledge that will make individuals more secure. The evolution of big data will make payments smarter and easier and help to redress the balance between security and convenience. Big data will be the ultimate key to tightening up security at POS, online and in bricks and mortar environments.”
Another way in which businesses intend to tackle fraud is by reducing their dependence on traditional payment methods. 45 percent of American businesses would like to see a decline in payment by cheques, with debit cards and credit cards not far behind. The susceptibility of these payment methods to fraud is a significant factor, with credit cards being ranked as the most vulnerable to fraud by 65 percent of respondents, followed by cheques (47 percent) and then debit cards (40 percent). This is an area where consumer and business views align – nearly a third of consumers have experienced credit card fraud in the last year, with almost one in four receiving no reimbursement.
The desire to phase out traditional payment channels is matched by a corresponding business interest in emerging payment methods. Nearly a third of businesses are likely to introduce voice-activated systems like Alexa within 2 years, while nearly one in five favour some form of biometric payment and a quarter are looking to introduce cryptocurrencies. This is on top of the 23 percent who are planning to introduce mobile wallets. Consumer behaviour is also helping to drive these changes, with nearly a third (31 percent) adopting mobile wallets; one in four having used biometric and voice activated systems and 14 percent already using cryptocurrencies for payments.
To read Lost in Transaction: Volume II, which includes comparisons between consumer and business attitudes to fraud, security and alternative payment methods in the US, UK and Canada, click here.
About Lost In Transaction
Lost in Transaction is an independent research project commissioned by Paysafe and supported by the London-based agency Loudhouse. The research report was completed by surveying 300 businesses and 3,038 general consumers in September 2017 in the UK, Canada and the USA about their attitudes to fraud, security and payment methods.
Paysafe is a leading global provider of end-to-end payment solutions. Our core purpose is to enable businesses and consumers to connect and transact seamlessly through our industry-leading capabilities in payment processing, digital wallets and online cash solutions. Delivered through an integrated platform, our solutions are geared towards mobile-initiated transactions, real-time analytics and the convergence between bricks-and-mortar and online payments. With over 20 years of online payment experience, a combined transactional volume of US$48 billion in 2016 and over 2,300 staff located in 12 global locations, Paysafe connects businesses and consumers across 200 payment types in over 40 currencies around the world. Paysafe Group plc shares trade on the London Stock Exchange under the symbol (PAYS.L). For more information, visit: www.paysafe.com.
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