Merchant bias to convenient checkout raises payment security concerns
As consumers are willing to pay a premium for user-friendly shopping experiences, online merchants struggle to balance between smooth checkout and ensuring payment security.
March 13th, 2024. Online shoppers love an easy checkout process, with 86% saying they are willing to pay more for a great customer experience. In line with this trend, PayPal has just unveiled a one-click guest checkout service called “Fastlane,” to make online purchasing as quick and easy as possible.
But easy customer experience does not always go hand-in-hand with payment security, says Simas Simanauskas, Chief Business Officer at ConnectPay, an all-in-one financial platform. Hence, many ecommerce merchants find it challenging to introduce new safeguards without adding too much additional friction to the checkout process.
“Some segments of customers value security or cost over ease, but merchants know that the majority will choose frictionless transactions over everything else,” says Simanauskas. However, he notes that, in the long term, customers and merchants both stand to benefit from a better balance between user experience and payment security, especially as fraud attempts rise by at least 20% every year.
Common types of fraud in the ecommerce world
There are a few major types of ecommerce fraud that better security could help mitigate. For customers, there is the risk of malicious actors gaining access to accounts and payment information. Techniques for doing this have evolved in recent years, from creating fake websites and sending messages with misspelled links to using AI and deepfake technology to impersonate company personnel.
For merchants, the two most common types of fraud are committed by customers themselves and cost retailers an estimated $100 billion annually. The first is known as “promo fraud,” in which customers take advantage of easy-to-guess voucher codes and generous referral programs, by signing up for multiple accounts and referring themselves.
The second type of fraud that merchants commonly face is one in which customers file a claim for reimbursement as if they have not received the goods or services they ordered, when in fact they have received them. These types of fraud are sometimes called “friendly fraud”, but they are far from friendly to the merchants affected.
Striking a balance between security and convenience
With fraud attempts on the rise, governments and the payment industry are increasing their efforts to strengthen transaction security. “The PSD2 adopted by EU member states mandates Strong Customer Authentication (SCA), while a card scheme version of SCA called 3DS, already mandated in the EU, is being actively pushed to the rest of the world,” says Simanauskas. “At the same time, there is a wider adoption of digital wallets like ApplePay and GooglePay, which make authentication more streamlined and intuitive. All this means that customers are gradually getting used to confirming their payments, which is a big win for security.”
According to Simanauskas, increased security measures are becoming a necessity in the face of more sophisticated types of fraud, and the best way forward is to educate the customer and increase tolerance for friction.
“Merchants, payment processors, and banks can do everything on their end to ensure that payment details are captured securely, but if a user willingly gives out their login details or authorizes a payment for someone else, there is little we can do at that point. So customers need to know how to spot when information is being requested by genuine merchants, and when it is being requested by fraudsters,” the expert says.
Payment processors can also work with their merchant clients to find an optimal balance between security and convenience.
“The latest fraud detection tools, for example, work in the background to recognize irregular customer behavior and raise alerts about a potential problem. At the same time, tokenized payment methods such as ApplePay and GooglePay help ensure user’s authorisation is captured in the most convenient manner.”
Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.