As competition in e-commerce grows increasingly stiff, customer experience is the new mantra. Consumers are firmly in control. So merchants are on a mission to eradicate friction and maximise convenience.
But where does it end? Should merchants put convenience above all else? Or is there still a place for security, even if it might slow transactions down?
Lost in Transaction Volume I uncovered a rapidly evolving landscape in the payments industry, where control of every aspect of a transaction — channel, product, price point, payment method and delivery options — is in the customer’s hands.
Many a savvy merchant’s response has been to devote a growing chunk of their efforts into perfecting the customer experience. The business intention is to make it easier for customers to buy, and to increase the likelihood for more sales, thereby winning the battle for consumer loyalty. But, is an effortless buying experience truly the holy grail of the digital shopping age? Or should other factors such as security and fraud prevention take precedence?
Cybercriminals have formed part of the e-commerce landscape since the dawn of internet shopping. But, in the intervening years since the first online shoppers took to the web, customer awareness and education of security and fraud has also increased.
53% of Canadians, 52% of Brits and 49% of Americans we interviewed said they thought the risk of fraud was an inevitable part of shopping online. This level of awareness is having very real consequences on user behaviour: 81% of respondents said they avoid shopping on unsecured and public WiFi networks — a deliberate effort to minimise risk.
While a reassuring majority of those who fall for fraud recover at least part of their losses, the experience often permanently damages their trust in the merchant they’ve bought from. The data we’ve collected illustrates the lasting effect fraud can have on a merchant’s bottom line.
Our findings show that consumers are starting to favour safety over speed and ease of checkout.
Merchants typically take high cart abandonment rates to mean that convenience should take precedence over security. But while customers dislike friction, it turns out that they don’t dislike it enough to justify the trade-off: risk of fraud or data breach.
The contrast between the prevailing industry view and consumer attitudes is stark. 36% of merchants fear customers won’t take well to fraud prevention measures that could affect convenience. But 56% of consumers are actually happy to accept whatever measures it takes to eliminate fraud, including two-step authentication.
Of course, this data doesn’t mean convenience should go out the window. If anything, it illustrates just how delicate the balance is that merchants must strike to succeed.
The tension between the customer preference and the duty businesses have to protect their customers from the risk of fraud plays out in our findings. 51% of merchants expect credit card payments to continue to grow in popularity over the next two years, mainly in response to customer preferences. But, at the same time, 60% of merchants want to retire them, because they view them as the payment method that is most susceptible to fraud.
Traditional payment options aside, there is one area where customers and merchants can agree: cloud-based wallets, mobile wallets and alternative payments such as cryptocurrencies. Our research shows that these will continue making inroads into the mainstream. Customers expect them to become more widely available in the coming years. And more and more merchants are introducing them, prioritising them or both.
As alternative payment methods move beyond early adoption, new types of fraud will inevitably come into play. As things stand, the value of faster, more efficient fraud prevention isn’t in dispute. For 71% of respondents, it’s a top priority. And, eight in ten businesses intend to increase their anti-fraud budget by at least 10% in the next two years.
The challenge, then, 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.
Ultimately, fraud prevention must also inform merchants’ overall business 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.