- Nov 12, 2020
Why security is still the primary concern for online businesses and consumers
Our latest Lost in Transaction research report asked businesses about how they had been affected by COVID-19, and their plans moving forward. The security of their checkouts, and alternative payment methods, are top of their agendas.
We have been tracking the views of businesses and consumers on the security of financial data, and their fears of being a victim of fraud, for a number of years through our Lost in Transaction research series.
For example, in 2018 74% of businesses told us they felt they were being targeted by fraudsters more than the previous year, and so security was a key criteria when considering payments providers for more businesses (59%) than any other. In the same year 59% of consumers told us they felt uncomfortable with sharing their financial details online to make a payment, and in 2019 more than half (56%) of consumers said they were concerned that switching from passwords to biometric authentication for digital payments would result in a dramatic increase in fraudulent transactions.
Overall, the importance of payments security has always been paramount for both consumers and businesses, even when compared with user experience and convenience. And despite the world being shaken to its core in the wake of COVID-19, this hasn’t affected online payment security remaining the primary concern of businesses.
The impact of COVID-19
In fact, being a victim of fraud is an even greater concern of businesses since the outbreak of the pandemic.
In September we commissioned independent researchers to ask 1,110 online businesses based in the UK, US, Canada, Italy, Germany, Austria, and Bulgaria how they had been affected by COVID-19, and the trends they had seen emerge in shifting consumer behaviour within their online checkout.
Over half of online businesses (55%) told us that an increased risk of fraudulent transactions has been one of their greatest concerns during the pandemic. And this is reflected in consumers; 60% of businesses believe that consumers are more concerned than ever about being a victim of fraud due to COVID-19 and 68% of businesses believe that consumers are increasingly looking to make payments online using methods where their financial details are not shared as a consequence.
Q: To what extent do you agree with the following statements?
And this is already having a tangible effect on the way consumers are paying online. 76% of online businesses said that they have already noticed a change in the way people complete transactions with them, such as a greater percentage of consumers paying with digital wallets or eCash, and when asked why the most popular answer from businesses was that consumers are looking for a more secure method of payment.
Q: Why do you think consumers are using new payment methods?
The growing threat of fraud
There are number of reasons for this. Firstly, the economic impact of COVID-19 has meant both consumers and businesses are even more focused on protecting their finances, as a delay in recovering lost funds may be more crippling than usual. In addition, there is strong historical evidence that criminal activity such as fraud rises during national and global crises, and the pandemic has been no exception.
Our previous research report Lost in Transaction: The impact of COVID-19 on consumer payment trends, that was published in May, told us that protection against loss from fraud (identified by 34% of consumers) and financial data being kept safe from fraudsters (identified by 32% of consumers) were the two most quoted reasons people chose a particular payment method.
And when we asked consumers, we also discovered that overall they didn’t feel as though payments were secure enough. Over half of all consumers (51%) said they would accept whatever security measures were required if it kept their data secure however poor it made the user experience, and another 25% said they would accept more inconvenience than they currently experience. Only 18% said the balance between security and convenience struck by payment methods was currently correct.
Q (to consumers): When weighing up convenience vs. security of financial data when making a purchase online, what element of risk would you be willing to accept?
New online consumers are shifting the landscape
But there are other reasons businesses are even more focused on the security of payment methods than ever. Chief among these is that 18% of consumers are shopping online for the first time, and concerns about sharing financial details with online merchants is one of the key reasons these customers have not shopped online previously. In addition there is another group of consumers that only shopped online with a select group of businesses that they had a personal relationship with; now they are open to shopping online more they are inevitably interacting with merchants they are unfamiliar with and their willingness to share financial details has shifted accordingly.
For online businesses that want to attract and keep customers from these two groups, offering a wider collection of payment methods will be essential. Businesses that do not seriously consider the impact of not diversifying their online checkout will not only fail to capture their share of this new market, but serious run the risk of losing customers that are changing their preferred payment method due to security concerns.