The Balancing Act Between Payment Safety & Convenience

5 mins read

DigitalCFO Asia | 25 April 2022

Troy Nyi Nyi

Regional Director, SEA & India, Forter

While frictionless payments have been an aspiration for several years, digital payment experts predict its catapult into the mainstream this year. From the widespread adoption of contactless payments to the rise in biometric authentication and mobile wallets (think Grabpay, ApplePay, AliPay, and more), the future of seamless, real-time digital payments has arrived.

As consumers continue to demand quicker automated payments, conventional e-commerce fraud prevention methods like pins, passwords, and 3D Security (3DS) are becoming less popular as they add another layer of friction. Nevertheless, authentication remains essential in preventing payment fraud through unauthorized transactions, and reducing costly chargebacks for businesses. In fact, Juniper Research found that merchant losses to online fraud will exceed $206 billion cumulatively between 2021 and 2025 – highlighting the need to tighten security rather than ramp down.

Unsurprisingly, businesses are often caught between a rock and a hard place when it comes to ensuring that payment safety isn’t compromised while providing a seamless customer experience. Forter’s research reveals that 18% of shoppers abandon a transaction due to a long and complex payment process. While this sounds like a small percentage, it makes all the difference when it comes to deciding whether a business thrives or dies out in today’s ultra-competitive retail environment.

To share insights on the topic, DigitalCFO Asia spoke with Troy Nyi Nyi, Regional Director of SEA & India at Forter.

Rising Trends In Digital Payments That Financial Leaders Should Be Aware Of

The digitization of payments has accelerated over the past several years as people seek more convenient, fast, and secure payment methods. In Southeast Asia, the total transaction value in the digital payments segment is projected to reach US$200 billion in 2022. With this growth, three key trends have emerged.

  • Contactless Payments

The pandemic has only furthered our transition into a cashless society, with tap-to-pay transactions growing more than 30% in 2021. Visa estimates that 63% of consumers in Southeast Asia are already adopting contactless payments as their daily habit. Most notably, the region is also the fastest growing for mobile wallets, with the usage of such payment methods expected to reach 439.7 million wallets by 2025. 

  • Buy Now, Pay Later (BNPL)
    The convenience of BNPL, allowing customers to access goods and services now while paying for them in the future, has made it a popular trend throughout Southeast Asia. In fact, BNPL is expected to be the fastest growing payment method for Singapore. But the potential risks – from policy abuse and card testing to chargebacks and refund fraud – that come with this type of transaction, need to be addressed through an effective fraud protection strategy. 
  • Cryptocurrency 

Most of today’s crypto transactions happen in Asia – as much as 31% of all transactions of the different cryptocurrencies happen here. Thus, it’s no surprise that cryptocurrency is becoming an increasingly normal method to transact. At least 82% of SMBs said they plan to accept some form of digital currency in the near future, such as crypto-linked cards for a convenient experience.

Overall, these three trends highlight a growing demand for convenient and frictionless payment methods. Businesses that tap on these trends can stand to differentiate themselves in their markets.

Frictionless Payments Growing To Be A More Popular Option For Consumers And Businesses

Convenience is now king in today’s digital-first world, and frictionless payments reduce the number of steps required to complete the checkout process. For businesses, frictionless payments mean fewer abandoned carts. Research by OnePoll on behalf of Forter revealed  that every year, the average person backs out of 96 online purchases halfway through. That’s an equivalent of US$2,500 in lost revenue per person! Thus, offering customers a frictionless checkout process supporting their payment method of choice would result in greater customer satisfaction and more repeat purchases. 

Robust Authentication Processes, A Necessity But Unpopular

The pandemic has altered consumers’ shopping habits. Over 70 million consumers in Southeast Asia have begun buying online since the pandemic began in 2020 – many for their first time. With the rise in new digital consumers with no purchasing history, businesses face the challenge of differentiating between legitimate shoppers and fraudsters. 

Smart authentication, rather than just robust authentication, is necessary to overcome this challenge and prevent payment fraud. Every transaction should go through authentication to reduce fraud losses, but not every transaction should trigger 3D-Secure or pins for authentication. The majority of transactions, even those from first-time online shoppers, are legitimate and should be treated as such. Therefore, it is crucial for businesses to leverage technologies that can help them identify which transactions require additional authentication steps – and which do not – to ensure a smooth customer experience for all.

Technologies That Accelerate Frictionless Payments Whilst Still Preventing Fraud

In a survey from 451 Research, 71% of organizations acknowledged that they over-emphasized fraud prevention at the cost of customer experience. Technologies such as artificial intelligence can help businesses make transaction decisions based on identity, not reactive or outdated rules. The ability to identify the identity behind the transaction allows businesses to know whether they can trust that customer. Fraud prevention service providers like Forter also enable companies to tap into an extensive network of global datasets and identities, thus helping them make more informed transaction approval decisions. 

In addition, machine learning can also allow businesses to be smart about how they use additional layers of authentication, such as 3D-Secure (3DS). While such technologies can be valuable in reducing fraud, applying a blanket authentication process will only lead to cart abandonment and revenue loss. Instead, optimizing the use of authentication for only necessary or suspect transactions is key to maximizing conversion rate and revenue.

Forter – Helping Online Businesses Increase Revenue, Reduce Fraud, And Improve Customer Experience

Forter works closely with online business leaders in Southeast Asia to integrate trust into every digital interaction, enabling businesses to reduce friction, optimize the customer experience and drive revenue. The company works with some of the largest online businesses in the world and has processed over US$500 billion in gross merchandise value since 2013.

Forter recently partnered with an apparel retailer that was applying 3DS to all e-commerce transactions, which included requiring a pin code to complete the transaction. This added friction to the customer journey and led to  a significant percentage of transactions being abandoned. Forter helped optimize 3DS use by automatically approving most transactions and sending only a fraction for additional authentication. This resulted in a smoother, more user-friendly experience for customers, ultimately increasing revenue by millions of dollars each month.

In addition to optimizing conversions and delivering a better customer experience, Forter also helps businesses tackle various types of fraud and abuse – from account takeover (ATO), refund fraud, chargeback fraud, policy abuse (like promo coupons and returns abuse), and more. 

All in all, if a business intends to thrive in today’s competitive landscape, they must employ not only the fastest mode of transactions but also must take into account ways to prevent fraud. They must protect their consumers’ data as this will add to their customer experience which will allow businesses to garner long-term consumers and allow the business to rise.