How can we maintain safe online commerce

VP Finance & Strategy at EverC.

The pandemic has changed virtually everything about our way of life, from how we access health care to how we buy and pay for our products.

As contactless has become more mainstream, digital payments have exploded and the trend shows no signs of slowing down. In fact, more than 4 in 5 Americans used some form of digital payment in 2021, according to McKinsey’s 2021 Digital Payments Consumer Survey. This includes online shopping through a browser or through an app, in-store payment using a mobile phone or QR code, or person-to-person (P2P) payments.

According to Visa 2022 Return to Business Study, 73% of small businesses surveyed said new forms of digital payments are critical to their growth. Consumers share similar sentiments. Thirty-six percent of consumers surveyed said digital payment acceptance is a major factor for in-store purchase choice, aside from price, while 41% of consumers surveyed said they had abandoned a purchase from a physical store because digital payments were not accepted.

Consumers are increasingly turning to mobile wallets like Apple Pay and Google Pay for their convenience. These have the ability to manage credit cards, rewards cards, memberships and more directly on a mobile device. Recent FIS PACE research reveals that 32% of mobile wallet users now have three or more mobile wallets downloaded to their smartphones, up from 21% last year.

The machine learning and artificial intelligence technologies that make digital payments possible are able to study shopper experiences and improve them over time, improving fraud protection and security.

Contactless digital payments and P2P payment apps like Venmo, Zelle and Square’s Cash App also continue to grow in popularity, allowing consumers to digitize the payments they make in-store and online. All three players recorded unprecedented growth in 2020, which only continues to increase. Experts estimate more than $1 trillion will transact via P2P mobile apps in 2023.

As the pandemic has spurred an unprecedented need for digital wallets and payments, consumers and businesses continue to use them for their convenience, security and safety. According to 2021 Outlook from Visa’s Return to Business Study49% of consumers believe that using contactless payment methods such as digital wallets is among the most important security measures stores should implement and maintain.

With this increase and the focus on digital payments, online and offline businesses that fail to provide relevant payment methods in a secure manner will fall behind and lose revenue. In the Visa 2022 Back to Business study, 59% of small businesses said they plan to go digital-only in the next two years or are already cashless.

With digital payments at an all-time high, it’s critical that consumers and payment organizations understand emerging trends and ways to ensure a safer shopping experience.

The benefits and risks of new payment trends

Another payment avenue booming in the wake of the pandemic is buy-it-now, pay-later (BNPL), which gives buyers the option of staggering installments, usually interest-free, while merchants receive payment. full in advance from fintech BNPL. (e.g. Klarna, Affirm, Afterpay) or now increasingly from the issuing bank. The traction of Visa and Mastercard allowing issuing banks to offer installment payments to their cardholders has been monumental.

Consumers use BNPL providers not only for deferred payments, but also for the convenience and user experience, often far superior to that of card payments.

Despite the benefits, the relatively new payment offering is not without its risks. BNPL providers are not yet subject to certain consumer protection laws, and BNPL loans currently lack some of the consumer protections that apply to credit cards, such as dispute protections and chargeback options in cases where goods purchased may be defective.

Other emerging trends include account-to-account payments, real-time payments (RTP) and open banking. These alternative payment methods are growing in popularity and taking market share from traditional card transactions, but payment organizations need to be diligent about new and existing risks.

RTP increases the risk of fraud with more instances of fake transactions and scams among P2P payments. Open banking, while designed to provide greater financial visibility and transparency, can lead to security breaches and fraudulent activity with third-party access.

To combat this, EY’s Jennifer Lucas says in “Three Ways COVID-19 is Changing the Payments Industry” that we can expect to see “greater adoption of machine learning and artificial intelligence both for authentication and in risk management models and the development of risk and analytics tools who can harness big data in new and innovative ways”.

Create a safer shopping experience

As a payment provider, it is essential to keep up with evolving developments and proactively prepare for changes and challenges in the regulatory framework in a growing and constantly changing market.

Here are three steps to consider to create a safer shopping experience.

1. Create a strategy to ensure your merchants adhere to your unique policies. This strategy will also help expose any vulnerabilities, such as bad actors laundering money through your business.

2. The world of digital payment requires thorough risk assessment tools. Merchants may be connected to a larger fraud ecosystem and need tools that can look beyond surface-level risk assessments.

3. Adopt an automated solution to scale and expand into new markets. This is necessary to keep up with the fast pace of the digital payments industry.

The rise of digital payments has created countless opportunities for the payments industry and transformed the way businesses interact with customers. As criminals evolve techniques in the real-time digital payment space, payment organizations must evolve their strategies and technologies to identify and mitigate fraud and money laundering risks.

With the rise of the internet and the continued growth of the payments industry, we all need to pay attention to new trends and regulations to stay safe and competitive.


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Elaine R. Knight