Ecommerce fraud on the rise
Even before the pandemic forced many purchases online, a shift to digital transactions was well underway. Sales online now account for more than 25% of all retail sales in the UK, an increase from around 15% five years ago, according to the Office for National Statistics (ONS). There is no sign that customers are going to stop shopping online for everything from clothing to home goods and even cars in the foreseeable future.
While it has never been easier for customers to buy online, the increase in cyber crime and Ecommerce fraud is a clear threat to customer confidence. Ecommerce firms have become a leading target for cyber criminals, who have capitalised on the lack of preparedness from businesses during the rapid pandemic transition to digital.
With a report from Juniper Research finding that the global e-commerce sector lost $20 billion due to fraud last year, there is a pressing need to better secure customer transactions.
As part of the EU’s Payment Services Directive (PSD2), a new Strong Customer Authentication (SCA) regulation was introduced for online transactions across the European Economic Area (EEA) and the UK. From March this year, all online retailers had to meet this regulation, after these additional security checks were delayed to give companies more time to prepare.
SCA: The secret to conversion?
Regulators hope that both customers and businesses will benefit from the need for shoppers to provide two forms of identification to their bank during online purchases. The extra checkout step may lead to more abandoned carts and lower conversion rates. If firms have not fully prepared for this shift, countless transactions could fail, losing businesses a large number of sales.
Those retailers that prioritise a seamless omnichannel experience for customers can gain a competitive edge over rivals who lack an easy-to-use system. By embracing automation solutions for customer authentication, retailers can almost instantly identify transaction requests and quickly calculate fraud risk, resulting in higher approval rates and fewer chargebacks.
In practice, to make the process more seamless, most retailers will have to implement 3D Secure 2.0 and upgrade their checkout to meet the SCA requirements, if they have not already done so. In addition, retailers should give customers clear information about what the new secure checkout is and why it is needed. Regular customers should also be given the option to whitelist a retailer they trust, so they do not have to undergo these checks every time they purchase.
Online retailers are also evolving their approach to identity and age verification by introducing new solutions like 3D Secure 2.0 and ensuring that their payments platform accepts digital wallets, including Apple Pay and Google, as they meet the two factor authentication requirements.
The payments ecosystem can expect to benefit from the introduction of a robust and secure regulation like SCA, with Ecommerce fraud and cyber crimes more difficult to achieve thanks to this initiative. It is also true that some retailers are facing challenges meeting SCA and those firms that double-down on providing customers with a seamless experience will be able to offer a far superior customer experience than less advanced rivals.
___________________________________________________________________________________
Written by Finbarr Toesland, Editorial Contributor, VC Innovations
The conversation continues at the Future Identity Festival 2022, co-located with the Fintech Talents Festival on the 14th – 15th November, at The Brewery, London.
Join 2000 festival-goers as we explore the trends and technologies shaping the future of financial services. World-class learning and engagement, meets live entertainment and our famous craft beer bar, all while connecting with the industry players you are looking to meet. Book your place now!
