How to reduce online payment fraud without adding too much friction
Back in 2002, the fraud losses related to eCommerce fraud on UK-issued debt and credit cards amounted to 28 million pounds. Decades later, that number continues to skyrocket, with the annual losses hitting 376.5 million pounds as of 2020.
During the pandemic, as people spent more time online than ever, there were new waves of online crime. Over £609.8 million was stolen through fraud and scams in the first half of 2022, prompting urgent calls for greater cross-sector action.
Online security is now a concern on everyone’s minds. Leading global digital identity verification platform Trulioo has revealed new research showing consumers worldwide have become increasingly concerned about online fraud and identity theft when making payments.
Their new report Finding the payments sweet spot between security and speed shows the primary area of concern is security, with 73 per cent of online payment service customers saying it is a bigger consideration now than it was two to three years ago.
Shoppers are not the only ones concerned. New security measures came about earlier this year with the introduction of Strong Customer Authentication (SCA) regulations, which have affected banks across the European Economic Area (EEA) and the UK, requiring them to perform added checks when customers make payments to verify their identity.
SCA has been on a complexity level similar to GDPR, with rules subject to varying interpretations among card networks, national regulators, and issuing banks. As the risk grows worldwide, the regulations are part of a united global effort to protect customers.
However, the regulations put a new strain on the customer experience. When a customer receives text messages requiring codes or other identity verification methods, it makes for a more convoluted purchasing experience. Such additional steps come at a cost to businesses.
Specifically, added friction during checkout significantly influences whether or not a customer completes their purchase. Almost a third of shoppers who abandoned a purchase have reported doing so due to a checkout process being ‘too long or complicated’.
This can have an unprecedented impact on business performance in the long term. Retailers have reported checkout abandonment can result in up to a 70 per cent loss in sales on average. In India, similar SCA legislation resulted in a sudden conversion rate decrease of 25 per cent across some firms.
This means the SCA regulations have thrown open the door for innovation in the payment industry, with emerging opportunities for secure, user-friendly authentication experiences that don’t trap consumers with unnecessary friction regarding payment.
The key is to find that sweet spot where a consumer feels safe to purchase without being put off by endless layers of identity checks. The industry players that respond to the need for an intuitive and simple way to carry out online payments are the ones that will thrive.