Survey: Payment fraud is booming

Both retailers and consumers are reporting growing levels of fraudulent online and in-store transactions.

According to the American Express 2019 Digital Payments Survey, almost seven in 10 (69%) U.S. retailer respondents reported that significant amount of company time and expense is dedicated to dealing with payment fraud. Nearly eight in 10 retailer respondents (77%) reported that their companies experienced some type of fraud over the course of being in business, and their efforts to manage security are impacting their businesses’ bottom lines.

Surveyed retailers estimate an average of 27% of their annual online sales to be fraudulent transactions, a significant increase from 18% in 2018. And compared to 2018, significantly more retailers agree that their business is vulnerable to payment fraud across multiple channels, including mobile transactions (82%, up from 73% in 2018), their website (79%, up from 74% in 2018), and POS payments (66%, up from 55% in 2018).

In addition, more than four in 10 (42%) of consumers in the survey have experienced a fraudulent attempt to use their credit card or other payment information, and almost six in 10 (59%) say they are worried about having their payment account or credit card information compromised when making an online purchase.

As a result, many retailers are investing more in payment data security, with survey respondents reporting that they spent an average of 33% of their IT budget in 2019 on payment data security, up from 27% in 2018.

While payment fraud has been growing, consumers have also come to expect a fast and seamless checkout experience across all payment channels. For example, 62% of consumer respondents said they have left a store without making a purchase after waiting too long in line to pay, while 85% have left items in their cart and not completed the online transaction. 

When it comes to digital payments, 55% of retail respondents currently store customer profiles and card payment information for future purchases, with an additional 22% planning to do so in the next 12 months. Yet 76% would prefer not to hold onto this data, in order to alleviate costs and security concerns. 

In addition to online checkout, consumers also expect a seamless checkout experience in-store, and more than eight in 10 retailers surveyed agree that contactless provides a faster checkout option for in-person payments (83%) and is more convenient for customers than paying with card or cash (84%). 

Contactless is an emerging favorite as a consumer payment option as well. One quarter (26%) of consumers have used contactless at least once within the past six months.

The majority of retailers responding to the survey are interested in the benefits of other innovative payment security solutions like biometrics, tokenization, and more. They overwhelmingly agree that requiring a one-time password for additional security to complete a purchase (77%), biometrics (76%), and tokenization (70%) are effective in preventing fraud.

The 2019 American Express Digital Payments Survey is based on a sample of 1,004 respondents. The retailer survey is based on a sample of 400 retail business leaders in the U.S. who have responsibility for making decisions regarding customer payment options, IT/data security, or online sales strategy and planning.