We’ve seen some dramatic shakeups in the payments industry over the past decade. Many of the same technologies, strategies, and concepts that now dominate the market — mobile commerce, IoT, voice-enabled commerce—barely existed in 2010, if at all. Transformative as it may have been, though, the next decade promises even greater upheaval in the market.
It’s near impossible to keep up with the pace of change in ecommerce payment. That’s a problem, because fast-paced innovation will inevitably lead to vulnerabilities.
New Risk Factors in 2020 and Beyond
You’re facing an uphill battle as a merchant. You must find a way to conduct day-to-day operations, while also staying informed about new technologies and threat sources as they develop. It’s a tricky situation to navigate even under ideal conditions.
That’s not to say it’s all bad. Quite the opposite, in fact; new developments can present incredible opportunities to reach and engage customers, identify new revenue streams and grow your business. For example, the buy online, pick up in store or BOPIS model is revolutionizing how customers shop for groceries and other goods.
As the market evolves, though, fraudsters evolve their tactics to manipulate it. Introducing BOPIS to the food and beverage vertical, for instance, led to a surge in chargebacks for that industry over the last few years. When merchants brought ecommerce elements into their payment model, they inherited various issues such as fraud, chargebacks and a consumer entitlement mentality (more on that below).
Without the right approach, revolutionary opportunities for profitability could fall victim to advanced ecommerce payment fraud threats:
- Open Banking Fraud: Bad actors manipulate the flow of data between banks and third-party service providers.
- BOPIS Abuse: Fraudsters take advantage of the fact that many locations don’t require ID or payment verification to pick up orders.
- Loyalty Points Theft: Loyalty points hold value like cash, but are less stringently protected, making them hot targets.
- “Double-Dipping” Travel Chargebacks: After an incident like a carrier collapse, cardholders may file a chargeback, then seek remuneration through insurance bonds.
- Recurring Billing Fraud: Subscription services are lucrative, but highly susceptible to friendly fraud.
Consumer Pressure is Part of the Problem
While new and developing fraud threats are part of the problem, another issue is the new customer mentality. We’ve unintentionally trained them to have a kind of concierge perception of ecommerce payment. Faster, more options, less friction, instant return credit … all of this combines to create a warped perception among customers as to the real market dynamics.
Buyers today don’t think of making a purchase in the same way they once did. Banks, for instance, are not just payment facilitators but concierge services. Buyers expect high security standards, fast processing and personalized experiences with every payment. And, while merchants should strive to always provide better experiences, the pace of change lags customer expectations.
Banks could play a role in setting customer expectations. They instead choose to oblige them for the sake of ensuring loyalty. The burden then shifts onto your shoulders to meet those overinflated expectations.
We shouldn’t have to choose between lax practices that cause spikes in fraud, and overly tight standards that drive away customers. Beyond singular trends in fraud, this is what I really want to drive home about the state of the market in the new decade: We need to strike a balance between experience and security.
Dynamic Problems Call for Dynamic Solutions
According to a recent study by Kount, 42% of businesses who consider themselves “very digitally mature” were nonetheless held back from digital innovation by concerns over ecommerce payment fraud. The fear is understandable, given what’s at stake. However, despite constantly evolving threats facing the market, there are still opportunities to thrive without fraud skyrocketing.
The best approach is to take the time to develop a comprehensive, adaptable strategy. In my view, having a multilayered understanding of the problem is foundational. It will guide you in developing a strategy composed of complimentary pre- and post-transaction fraud prevention tools. As mentioned, this strategy should be adaptable and able to evolve alongside new threats.
You won’t be able to stop every fraud incident. New threats will inevitably catch you off-guard from time to time. However, adopting a dynamic, comprehensive strategy will set you up for success in the new decade.
Monica Eaton-Cardone is Co-Founder and COO of Chargebacks911