Research from Paysafe outlines balance between convenience, data privacy and risk as online retail overtakes offline

The majority of UK consumers now accept the risk of fraud when shopping online as eCommerce shows no signs of slowing down, according to findings from Paysafe.

Seven in 10 (70 percent) now prefer shopping online rather than going to physical stores, and a similar number (68 percent) shop online much more than they did a year ago.

This is despite almost two thirds (65 percent) of consumers accepting that a certain level of ecommerce fraud is ‘inevitable’ during the ecommerce process, up from 52 percent last year, underlining the increasing value consumers put on convenience.

One third (33 percent) of UK shoppers said they have experienced payment fraud in the past year, up 6 percent on 2017. This is perhaps symptomatic of merchants continuing to prioritise digital sales. Research from Ovum shows 58 percent of merchants place great value in reducing lost sales online compared to tackling fraud. Nearly half (48 percent) admitted they would accept a higher level of fraud in return for greater sales.

The report from global payments provider Paysafe also showed that when shopping online, 61 percent have used digital wallets in the past month, 34 percent have used a credit card, and 57 percent a debit card. Meanwhile, 51 percent are using in-app purchases more than a year ago, as the popularity of services such as Uber and Deliveroo change the traditional eCommerce payment process by retaining customers’ information for a seamless app experience. In fact, 79 percent now say they prefer to shop on a website that already has their payment information stored, highlighting that UK consumers place a premium on convenience.

Yet, data shows these attitudes do not translate to the realm of ‘frictionless’ payments – i.e. invisible transactions that take place ‘behind the scenes’ in apps – which are being held back by UK consumer concerns over security and data privacy, according to the findings. 52 percent of UK consumers cite fraud as the biggest barrier to using them; 43 percent express concerns around the use of their data, while two thirds (67 percent) think voice-activated systems are not secure.

And in spite of the popularity of eCommerce, cash continues to thrive as the most common form of payment: 88 percent of consumers used it in the past month to make a purchase. Although 62 percent of UK consumers carry less cash than they did a year ago, falling from an average of £33 last year to £21 in 2018, their relationship with cash is changing and there are other ways to keep it at the forefront of the payment mix. For example, in Austria and Germany, online cash replacement systems which negate the need to share financial data are used by 12 percent and 9 percent of respondents respectively. Indeed, 67% of UK consumers said they feel more comfortable purchasing online via a payment option where their financial details are not shared. In North America, prepaid cards are the most popular cash alternative, used by 18 percent of Canadians and 16 percent of Americans respectively.

Commenting on the research, Oscar Nieboer, Chief Marketing Officer, Paysafe Group, said: “UK consumers’ attitudes towards fraud in payments are largely defined by the medium of the transaction. In the UK, we have now reached a level of maturity in online retail – most websites are optimised, the checkout process is increasingly simple and delivery is getting quicker. In turn, more consumers are telling us they are accepting a level of fraud for this convenience. What is notable, though, is the same rules do not yet apply to biometrics, such as voice-activated payments. The idea of a consumer’s unique biometric data being defrauded is uncomfortable, and this manifests as emerging technology like voice not yet attracting mainstream usage for payments.”

These findings emerge as other regions are taking active steps to navigate the fraud landscape typically associated with online retail. Only 28 percent and 26 percent of German and Austrian consumers accept a level of fraud is inevitable, which is why pay by invoice is popular in these regions. 29 percent of Germans and 38 percent of Austrians have used this method, which circumnavigates the entry of payment details online, with offline verification and authentication replacing it.

“What the diversity of payment types in other regions shows is we shouldn’t simply accept fraud. We shouldn’t have to choose between risk and convenience, and in a time of hyper-awareness around data security and privacy, merchants must place a premium on securing customers’ data now more than ever,” said Nieboer.