More than half (52%) of UK consumers think fraud is an inevitable part of shopping online. That’s according to new research conducted by Paysafe, the global payments provider. In what is most certainly 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, 60% of 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.
By contrast, less than a third (32%) of UK businesses believe their customers would favour tighter security, while 59% think longer verification processes increase their risk of losing customers. In fact, only one-in-ten consumers abandon online shopping carts due to payment security taking too long, while the most significant driver of abandoned carts (according to 43% of those consumers questioned) is hidden transaction fees and delivery charges.
One further key issue highlighted by the report is the trade-off merchants face when balancing risk and revenue generation. 69% of businesses surveyed want to increase customer sign-ups and transaction volumes by reducing risk thresholds for ID verification. However, 78% also wish to produce more effective verification measures to reduce fraudulent transactions, which presents a potential conflict with their revenue ambitions.
These conflicting views exist even though, according to 77% of businesses questioned, transactional fraud is a top priority in the Boardroom. In addition, 42% of merchants state that over 5% of the transactions they deal with are fraudulent. In this context, eight out of every ten businesses expect to increase their spend on fraud prevention measures in the next 12 to 24 months, typically by at least 10%.
Front of mind
Commenting on these research findings, Andrea Dunlop (CEO for acquiring and card solutions at Paysafe) stated: “In many ways it’s surprising to see such a consumer focus on security features rather than more convenient checkout processes. However, it’s clear that protection against fraud is front of mind. Merchants will need to focus on delivering the right balance of fraud protection and ‘frictionless’ experience for their customers.”
Another way in which businesses intend to tackle fraud is by reducing their dependence on traditional payment methods. Nearly 40% of UK businesses would like to see a decline in payment by credit cards, with debit cards and cheques 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 54% of respondents followed by debit cards (45%) and then cheques (36%). This is an area where consumer and business views align: nearly a quarter of consumers have experienced credit card fraud in the last year, with almost one-in-five receiving no reimbursement as a result of these crimes.
The desire to phase out traditional payment channels is matched by a corresponding business interest in emerging payment methods. A quarter of businesses are likely to introduce voice-activated systems like Alexa within two years, while one-in-five favour some form of biometric payment and 14% are looking to introduce cryptocurrencies. This is on top of the 26% who are planning to introduce mobile wallets.
Consumer behaviour driving change
Consumer behaviour is also helping to drive these changes, with one-in-four consumers adopting mobile wallets, one-in-six having used biometric and voice-activated systems and 12% already using cryptocurrencies for payments.
Dunlop concluded: “Fraud remains a very real problem for merchants of every size, so it’s not surprising that they’re looking to the future for better detection and prevention technologies. This research shows that consumer demand for biometric payments and cryptocurrencies exists. The big challenge for the industry is to implement them safely as well as conveniently.”
*Read Lost in Transaction in full at www.paysafe.com/lostintransaction