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The Effect of Rising Fraud Levels on Consumer Trust

By Allan Syms, COO at MYPINPAD

Earning Consumer Trust 

More than £1.7m a day was lost to financial fraud across payment cards in the UK last year. This news makes for uncomfortable reading and has inevitably had a negative impact on consumers’ trust in online banking and shopping.

For online merchants to increase their revenue, consumers must trust that their personal and payment details are secure are all times. This means merchants, banks, payment service providers (PSPs), acquirers and issuers’ technology must be secure. If trust is damaged, it will have a serious knock on effect on the willingness of consumers to make further purchases online, reuse a website or merchant that failed them and their willingness to adopt additional online payment methods.

More consumers could be making online payments if they had a better understanding, and greater confidence, in the processes and security measures behind online transactions.

Allan Syms, COO at MYPINPAD, discusses how those involved in the payment chain must understand how to win and maintain consumer trust. 

Fraud: Continuing to shape the payments landscape                                                

Recent studies show that payment card fraud in the UK reached an estimated £618m in 2016, with the global figure standing at an estimated $21.84bn. This is despite the fact banks, PSPs and issuers took steps to reduce payment card fraud and prevented £1.38bn of fraudulent transactions globally in the same year.

As a result of ongoing fraud threats and data breaches, consumer trust is being challenged and many have a lack of confidence in making online purchases. Security is at the forefront of consumers’ thoughts with 67 percent of respondents concerned or very concerned about online shopping and banking.

MYPINPAD’s recent consumer trust survey discovered that security is the priority for most consumers when it comes to online purchases. Only 2 percent of those surveyed said that they would rather have a fast transaction over a secure one.

Our results indicate that consumers are becoming more worried about fraud. A sign that banking institutions and Payment Service Providers (PSPs) need to step up their security efforts to maintain consumer confidence. Merchants with an online and mobile presence need to remain vigilant and open to a wider variety of suitable fraud prevention solutions.

Respondents said they expect the security of online commerce to improve over the next five years, and merchants must rise to these expectations. The use of both PIN and biometric based authentication was identified as the most significant step online retailers and banks could take to improve consumer trust, whilst many consumers believe the use of PIN is a strong method to authenticate and secure a transaction.

What can be done?

It is clear consumers have huge concerns about the security of their transactions, which impacts their trust in online payments services and as a result has affected their shopping behaviour.

When asked what online retailers and PSP’s could do to improve the trust consumers have in them, 40 percent of respondents to MYPINPAD’s survey wanted to use card PIN as a means of authenticating an online transaction (in a similar vein to that of an in-store Chip & PIN environment) and 50 percent would like the option to use a combination of card PIN and biometrics.

The ability for consumers to enter their card PIN securely in to their own mobile device to authenticate a transaction is a significant and innovative step in the evolution of online payments. Authentication methods must be compliant with the upcoming PSD2 regulations and meet the European Banking Authority (EBA) requirements for Strong Customer Authentication (SCA). Entering a PIN into a mobile device facilitates SCA by verifying the identity of a person through something you have (the consumer’s mobile phone), something you know (their card PIN number) and with an additional layer of something you are (a biometric such as a fingerprint).

The EBA has made it clear that the proposed regulatory technical standards on SCA and secure communication are key to promoting innovation and improving the security of payment services across the European Union. If compliance and implementation of scalable security systems is done correctly, PSPs, issuers, acquirers and merchants will have the opportunity to transform the online and mobile industry as we know it; improving the customer experience, enabling greater transaction volumes, and adding to the value of the merchant services they deliver.

What are the next steps?

Across all channels, the industry needs appropriate and scalable security and authentication methods.

The growth of mobile payments in 2017 and beyond is inevitable, with adoption tripling in Europe from 18 percent to 54 percent since 2015[1]. As the popularity of online shopping continues to grow so have the level of fraudulent activity, consumer authentication now has no choice but to be multi-factor, consistent and convenient. Those within the payments ecosystem must ensure the consumer is protected.

Acquirers, retailers and payment service providers all have an important role to play in educating consumers about the benefits, security and convenience of making purchases online. This can be aided by providing solutions which add additional layers of security, and are convenient across multiple devices. Secure PIN entry on smart mobile devices is ready to meet imminent regulatory demands and can easily be deployed by traditional and new third-party payment providers.

Due to the fact PIN is a universally accepted form of authentication, it is already a habitual behaviour for consumers when making a purchase. Entering a PIN is familiar and trusted, providing a level of security consumers are comfortable with.

By combining this method with biometric capabilities, merchants would answer consumers’ demand for increased transaction security online and also incorporate the multi-factor authentication method which will be required of them under PSD2. By doing so this will provide a secure and convenient environment for consumers, bridging the gap between payments security and smooth customer experience. Overall, instilling trust back into the consumer.

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