ePayment Security Concerns: How Merchants Can Make Their Customers Feel Safe

by Steve Villegas 0


Transaction security is critical to online sales, but buyers apparently have limits to the security protocols they’ll put up with, according to a new survey.

Merchants that want to sell internationally should make transactions as easy, convenient and safe as possible, which likely involves offering the payment options preferred in local markets.

A new Experian survey of shopping habits in several countries shows that two-thirds of respondents appreciate the security protocols merchants have to keep their purchases safe. However, 42% of millennials indicated they would shop online more if security options were less onerous.

It’s a fine line that merchants have to walk between sufficient transaction security and shopping cart abandonment. The stakes are high, as PPRO research shows that more than half of shoppers have stopped a purchase because their preferred payment method wasn’t available. On the other hand, the 2018 Identity Fraud Study by Javelin Strategy and Research found that one out of every 15 U.S. consumers has had credit card accounts violated by data theft.

About three-quarters of all e-commerce purchases in the U.S. involve credit cards, but the percentages in other countries vary widely, according to PPRO research. Card-based transactions in 2017’s three biggest e-commerce growth markets – Indonesia, the Philippines and Mexico – were just 27%, 5% and 36%, respectively. Indeed, local payment methods (LPMs) comprise 59% of transactions  across the globe.

Matching the market with the preferred local payment methods can give merchants a leg up when selling into international markets.

The growing attractiveness of e-wallets and bank transfers

One alternative to a credit or debit card is the e-wallet, where a shopper can be authenticated during the payment process. Shopper data is encrypted and safely stored, and in the event of a hack, the only funds exposed are those left after the transaction occurs and not the remainder of the money in the shopper’s bank account.

Among U.S. consumers, 20% of all payments now occur with e-wallets, according to PPRO research. That’s the second most-popular payment option, after cards, which account for 61% of payments.

Even more security is available through a push-payment transaction. Instead of the merchant “pulling” funds from a debit or credit card, the shopper initiates the transaction without providing any sensitive, personal information. One of the leaders in this transaction space is the real-time bank transfer, a process that has been greatly simplified, and popularized, by smartphones that boast increasingly sophisticated apps for this purpose.

iDEAL, SOFORT and MyBank are examples of the genre, which all European banks have accepted since the start of 2018 with the implementation of PSD2. The initiative streamlines payments because merchants can directly access consumers’ data (with their permission) from their banks. Here, too, the momentum is building, as people in 13 of 36 countries surveyed prefer this method for e-commerce. Projections show push-payment transactions (ie. bank transfers) as the second most popular alternative payment method globally by 2021.

Opting for the most popular LPMs

Merchants that want to sell globally should work with their payment service providers (PSPs) to determine what local payment methods are prevalent in countries where they want to do business. Armed with this knowledge, merchants can create user-friendly ways for shoppers to check out using their preferred payment methods. Your PSP should be able to help merchants determine the most-appropriate LPMs in a target market.

That doesn’t mean merchants should offer every payment method found in a particular country. Rather, offer those methods that encompass most of the local market.

People also like to safely pay in their native currency. Indeed, e-commerce experts at the eCommerce Worldwide Cross-Border Summit in 2017 believed that 93% of international customers would rather pay with their local currency.

Demographic trends also demonstrate the deeper penetration of local payment methods. Shoppers aged between 18 to 30 are more favorably disposed toward them, and Millennials (in particular) are the most willing adopters of local payment options. Younger shoppers, especially, are using mobile payment offerings such as Apple Pay and Google Wallet.

There’s another factor to consider in favor of local payment methods, too: cart abandonment. Shoppers have plenty of reasons for aborting their purchase before checkout – navigation problems, lack of progress indicators, confusion about saving carts in progress. Giving them more payment options minimizes another potential reason for shoppers to abandon their cart.

For US merchants, the time is now to realize that offering a range of non-card payment options with more advanced security features may be the best way to avoid fraudulent transactions without reducing sales. In the end, transaction security is critical to consumer confidence, and offering a range of payment options in local currencies can help spur sales for merchants that sell internationally.