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Study: Afraid of online fraud, a majority of consumers want tighter security measures

As cyber-threats become more prolific, consumers believe fraud has become an inevitable part of shopping online.

Specifically, more than half (59%) of Americans think fraud is an unavoidable challenge when it comes to shopping online, according to “Lost in Transaction,” a report from Paysafe, a leading global payments provider.

However, they expect their favorite brands to take action. The report contradicts the widely-held belief that consumers value convenience and experience over security when shopping online. Rather, 58% of consumers are willing to accept any security measures needed to eradicate fraud, while nearly three quarters (71%) are open to the introduction of more secure payment processes such as two-factor authentication.

Only 39% of businesses in the United States believe their customers would favor tighter security, and two thirds (67%) think longer verification processes increase their risk of losing customers. Yet, only 12% of American consumers abandon online shopping carts due to payment security taking too long. Instead, hidden transaction fees and delivery charges are driving these abandoned carts, according to 37% of consumers.

Retailers are also constantly trying balancing risk and revenue generation. In fact, 67% of businesses 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 said 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%.

Another way businesses intend to tackle fraud is by reducing acceptance of traditional payment methods. Almost half (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. Credit cards were 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.

The desire to phase out traditional payment channels is matched by business interest in emerging payment methods. Nearly a third of businesses are likely to introduce voice-activated systems, like Alexa, within two years. Nearly one in five favor some form of biometric payment, and 25% 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.

“For years, consumers have had to overcome the apprehension that businesses know too much about them – from shoe sizes to food preferences,” said odd Linden, CEO of Paysafe Payment Processing, North America.

“But as the payment world evolves, it is this knowledge that will make individuals more secure,” he added. “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.”
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