More than half (59%) of Americans think fraud is an inevitable part of shopping online, according to new research from Paysafe—and most are willing to cope with more strenuous security to combat it.
The Lost in Transaction report, based on a survey of 300 businesses and 3,038 general consumers in September 2017 in the UK, Canada and the US, contradicts the widely-held belief that consumers value convenience and experience over security when shopping online. About 58% of consumers in the survey said they are willing to accept any security measures needed to eradicate fraud, while nearly three quarters (71%) said they’re open to the introduction of more secure payment processes, such as two-factor authentication.
In fact, only 12% 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% of consumers.
This attitude doesn’t line up with business assumptions however. By contrast, only 39% of US businesses believe their customers would favor tighter security, and two-thirds (67%) think longer verification processes increase their risk of losing customers.
One further key issue highlighted by the report is the trade-off merchants face when balancing risk and revenue generation. Sixty-seven percent of businesses surveyed want to increase customer sign-ups and transaction volumes by reducing risk thresholds for ID verification. But 76% 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%). In addition, 47% of merchants say that over 5% of their transactions are fraudulent. In this context, eight out of 10 businesses expect to increase spend on fraud in the next 12 to 24 months, typically by at least 11%.
“For years, consumers have had to overcome the apprehension that businesses know too much about them—from shoe sizes to food preferences,” said Todd Linden, CEO of Paysafe Payment Processing, North America. “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 brick and mortar environments.”
Another way in which businesses intend to tackle fraud is by reducing their dependence on traditional payment methods. 45% of American businesses would like to see a decline in payment by check, 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% of respondents, followed by checks (47%) and then debit cards (40%). 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.
In tandem with that, nearly a third of businesses said they are likely to introduce voice-activated systems like Alexa within two years, while nearly one in five favor some form of biometric payment and a quarter are looking to introduce cryptocurrencies. This is on top of the 23% who are planning to introduce mobile wallets. Consumer behavior is also helping to drive these changes, with nearly a third (31%) adopting mobile wallets; one in four having used biometric and voice activated systems and 14% already using cryptocurrencies for payments.