Merchants want to deploy a frictionless checkout system for their online sales, but with 27% of the sales ending up as fraudulent transactions, there is cause for concern.
This particular data comes from the 2019 American Express Digital Payments Survey. And according to the report from the survey, merchants are trying to find a balance between quick checkouts and security. But they are having to spend more resources to combat this threat.
So much so, 69% of the merchants in the U.S. are spending significant company time and expense to dealing with payment fraud. For small businesses who can ill afford to waste the time or money, it is a big problem. But with online sales increasingly making up more of the bottom line for small businesses, the issue has to be addressed.
In fact, this is what Jaromir Divilek, Executive Vice President, American Express, pointed out in the press release for the survey. Divilek says the survey is shining a light on this particular issue for its merchants. Adding, “We’re always looking to better understand our customers and their everyday challenges, and the survey points to a real need for emerging payments innovation to improve the online and in-store checkout experience.”
With this in mind, Divilek believes one of the ways to address this problem is with EMV contactless payments and EMV Secure Remote Commerce (SRC) solutions. However, it’s important to remember this is an ongoing problem which will require merchants to stay vigilant at all times. This is because the threat landscape in the digital ecosystem is always evolving.
Payment Fraud Statistics: The Evolving Landscape
Whether it is online or in the physical world, payment systems now operate in a digital ecosystem. This makes everyone using this ecosystem vulnerable to attacks, both merchants and consumers.
When it comes to merchants, the payment fraud statistics from the survey say close to 77% have been a victim of some type of fraud. This includes stolen (37%) or counterfeit (33%) credit cards; card skimming (29%); employee fraud (36%); chargeback (36%) or return fraud (31%); gift card fraud (32%).
Another key point the survey reveals is more merchants are feeling vulnerable to payment fraud across the different channels. More than four in five (82%) agree they’re vulnerable with mobile transactions in 2019, up by 9% from 2018 (73%). When it comes to website payments, they also feel more vulnerable (79%) in 2019 compared to 2018 (74%). And it doesn’t stop there because they feel point-of-sale payments also have risks with 66% today and 55% in 2018.
In terms of cost, merchants in the survey say fraudulent transactions account for an average of 27% of their annual online sales. This is up by 9% from the 2018 numbers.
Risk to Consumers
Payment fraud statistics show that, just like merchants, consumers are also falling victim (54%). Furthermore, 42% of respondents say they have experienced a fraudulent attempt to use their credit card or other payment information.
This is responsible for fewer consumers believing businesses are doing a good job to ensure their data is secure. The confidence consumers have has gone down from a high of 63% in 2018 to 57% in 2019. This may be the reason eight in ten consumers only shop online with a reliable or merchant they know.
Even though consumers are aware of the security threat, they still want the convenience of a quick checkout. And almost a third or 32% agree security procedures such as passwords and PINs are confusing and cumbersome at checkouts.
This further puts pressure on merchants, especially small businesses, to find solutions that address all of these pain points from consumers. At the same time, the solution also has to protect merchants from the threats they face.
Implementing a Solution
In the survey, merchants say they have to consider many factors when implementing security for multiple payment channels.
They want the solution to address ease of integration (29%), impact on the customer checkout experience (25%), level of risk exposure (23%), staff training (14%), and scalability (9%).
According to American Express, contactless payments and SRC provide frictionless transactions without sacrificing the safety of personal data. And merchants using these solutions say it is addressing the issues they and consumers worry about.
The majority of merchants (88%) agree contactless payment systems are easy to implement. They also agree (87%) they can be integrated with marketing tools just as easily for loyalty programs and other promotions. And when it comes to the cost of implementation 86% say it is a minor expense and there is very little employee training (74%).
The 2019 American Express Digital Payments Survey was taken with the participation of consumers and merchants.
The consumers were made up of 1,004 respondents weighted to U.S. census criteria who have made an online purchase three or more times in the past 12 months. This was carried out from August 15-20, 2019 using an online panel.
For the merchant side of the survey, 400 business leaders in the U.S. took part online from August 22-September 4, 2019. The companies must offer credit/debit card or digital payment options to their customers along with online/mobile payment.
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How often are these fraudulent transactions leading to losses for businesses? Or are they being caught before fulfillment?
That is a pretty high percentage. I guess it is now becoming more rampant.