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BEING HELD HOSTAGE: THE DETRIMENTAL IMPACT OF SLOW REFUNDS ON CONSUMERS

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By William McMullan, Director of eCommerce at Trustly

 

Refunds are becoming a bigger problem for both brands and their consumers.

Because of the pandemic and lockdowns experienced at various stages throughout much of 2020, online retail sales for the year were up 36% on 2019 – the highest annual growth seen since the early days of ecommerce back in 2007.

This has an obvious implication for returns and refunds. Even before the pandemic, UK returns rates averaged around 22% across all parcel types, well up on the 14% recorded in 2010.

And the legacy from COVID-19 is a more widespread adoption of a “buy, try, return” culture. According to a study by market research firm Mintel, almost half of UK online shoppers had sent a product back in the past year, rising to 60% for those between the ages of 16 and 34.

Whether faulty or damaged, poor quality or not as described, or a case of changing one’s mind, there are many reasons why consumers send goods back and ask for refunds, a process which can cause headaches for retailers.

 

Putting a financial burden on consumers

There is another problem alongside the growing volume of online sales and returns – one of speed.

Indeed, brands are receiving more and more emails, calls and chat messages to customer service teams with questions such as “Where is my refund?” and “Why is it taking so long?”

Such questions cause stress and frustration to consumers and brands alike.

The pandemic has certainly exacerbated this problem, the events and holidays space being a prime example. Here, consumers who spent money on tickets, hotels and flights have justifiably sought their money back for services they were no longer able to use.

Put simply, refunds are too slow to pass from merchants back into their customers bank accounts. This is because traditional finance systems do not operate at the same pace as ecommerce shoppers expect them to. The instantaneous, often 24-hour process between buying and receiving a product is not replicated when the transaction is reversed.

According to a recent Trustly survey looking into the financial implications of slow refunds, more than £3.5 billion of UK shoppers’ money has been held hostage in online refunds over the past year, with four in 10 having to wait between three and five days for their money to be returned.

Worryingly, these delays are having an adverse effect on people’s personal finances.

The Trustly study found that 45% of consumers who had requested a refund have been financially impacted by delays in seeing the money returned to them. This is hampering their ability to make financial plans, which means they are more likely to resort to taking out loans and paying interest on debts.

Meanwhile, more than a quarter of respondents (28%) said that their capacity to pay bills, rent and mortgage contributions has been directly impacted as a result of having money tied up in online refunds.

 

An opportunity to boost brand loyalty

Refund delays, as well as placing a burden on consumers, are also causing problems for brands.

When they make consumers wait for refunds, it puts a strain on the B2C relationship, which ultimately hurts their reputation and could result in a loss of business.

However, what these brands should realise is that there is a tremendous opportunity to win over more consumers by transforming the way refunds are processed. From repeat customers to rave reviews and a boosting public image, the business case for doing so is compelling.

Indeed, there are many sectors and businesses that stand to gain brand loyalty by offering faster (ideally instant) and more flexible refunds.

Our research found that the major sources of refunds fell into three broad retail categories, namely clothes and accessories (50% of refund requests), technology (20%), and home and garden (19%).

Drilling down into the research further, businesses with a younger consumer base have an even greater opportunity to boost brand loyalty.

Nearly one in three consumers aged 18 to 24 admitted that money being trapped in drawn out refund processes is hampering their ability to pay for essentials like food, whereas only 5% of those aged 55 or over reported the same issue. By transitioning to instant refund processes and systems that act as slickly as ecommerce platforms, brands can win over a hugely influential cohort of young customers.

Indeed, according to another study, just 11% of shoppers are very satisfied with returns. The main reason for dissatisfaction being delays in refunds, which was cited by 25% of respondents and represents a larger gripe than having to pay for returns.

Trustly’s survey backs these findings up. Some 63% of the 2,500-plus consumers we canvassed said that they were more likely to spend money with the same ecommerce retailer if they received a refund quickly. Meanwhile, 92% of customers who receive a good returns experience make repeat purchases, with the top 5% of returners generally being 30% more valuable in terms of average basket value.

A large majority (71%) of UK consumers also prefer to pay for things via debit as opposed to credit. This means that shoppers are seeking reassurance that their choice of payment method isn’t going to land them in debt, making the issue of delayed refunds an even greater problem.

Relying on legacy systems and age-old refund processes will ultimately see merchants being left behind. Faster refunds get shoppers back online sooner and more often and this is a dynamic that is both good for shoppers and good for retailers.

 

Business

Mitigating the insurance risks of climate change through geospatial data visualisation

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Richard Toomey, Senior Manager, Commercial Insurance at LexisNexis Risk Solutions UK and Ireland

 

In the lead up to the 26th United Nations Climate Change Conference of the Parties (COP26)[i] November 2021, A United in Science report[ii]  provided a stark warning of the impact and acceleration of climate change. The UK Environment Agency also warned of more extreme weather leading to increased flooding and drought[iii]. While some progress was made at the conference, understanding the changing risks created by extreme weather to price property insurance more effectively, and more importantly, to help mitigate the physical risks posed by climate change, has become imperative.

Mapped geospatial data intelligence including live data on flood warnings and river flows, viewed alongside data held by insurance providers on the properties in their portfolio, can be a key ally in helping to protect customers and reduce claims losses created by extreme weather events.

With the air temperature rising and heavy rain becoming more and more frequent due to climate change insurance providers are looking to identify properties that are more at risk than others. For example, properties with basements carry more of a substantial risk of surface water claims than others and especially in London where space is tight and water runoff is low. In the autumn of 2021, the industry saw a number of high value claims due to basement flooding. There are some really large high net worth (HNW) households with big basements which carry a significant insurance risk.  The problem is that in many cases insurance providers don’t know if they have a property ‘on cover’ that actually has a basement.

The huge and growing volume of data now available to the insurance market to assess property risk to the level the industry needs, could easily overwhelm and prove a barrier to the swift decisions needed in weather-related surge events. However, the evolution of desktop based geospatial data visualisation tools such as LexisNexis® Map View means insurance providers can make quick, informed decisions based on a picture or map of risk, looking at a specific geographical region, a postcode, an address or a single property outline.

They can look at environmental risks including flood, fire and subsidence and live flood data updated every 15 minutes direct from the Environment Agency, as well as highly predictive flood risk data from respected flood modelling organisations. Insurance providers can also bring in data on the characteristics of a property to understand more about its construction, including the type of roof it has, how many floors there are, the square footage, as well as further data on the location and the individuals behind a business to gain a more holistic understanding of risk for pricing.

Mapping of historical flood data brings a further dimension to the understanding of risk, revealing the maximum extent of all individually recorded flood outlines from rivers, the sea and groundwater springs in England and Wales. This takes into account the presence of defences, structures, and other infrastructure where they existed at the time of flooding and includes floods where overtopping, such as at seawalls, river breaches or blockages may have occurred.

But the real step-change for the market has been recent ability to view live flood and other environmental data in tandem with customer and policy data held within an insurance providers’ own databases.

Crucially, this means insurance providers can pinpoint down to individual properties, the policyholders most at risk as weather events unfold, should a river burst its banks, or a flood barrier fail and those properties that may actually be vacant at the time of the event.

Through data visualisation tools, insurance providers can gauge where flood water may go so that policyholders can be warned to take measures to protect themselves, their possessions and to move any vehicles to higher ground. They can even see where roads may have been closed due to fallen trees. All this intelligence helps with planning on the ground resources, working with local authorities and claims adjusters. Then, in the immediate aftermath, rather than wait for a deluge of claims, insurance providers are in a position to reach out to customers known to be in areas affected to support them through the claims process.

The inherent flexibility of today’s geospatial data visualisation tools for the insurance market means risk can be assessed as needed or as constant monitor for a whole commercial property portfolio. Fundamentally these tools are designed to streamline the assessment of property risk.

In the future, commercial and residential property claims data gathered from the whole of the market may allow insurance providers to look at a whole portfolio alongside past claims, but for now they can bring in their own claims data to build a more granular picture of risk, to price more accurately and understand how they could help mitigate future claims and potential losses caused by weather events.

A picture can say a thousand words and data visualisation tools can certainly make highly complex risk data easy to understand and act upon. Being able to instantly visualise an environmental risk to policyholders – day or night – using highly granular data on past and present flood events puts insurance providers in a more powerful position to reduce the misery and costs caused by extreme weather.

[i] https://ukcop26. org/wp-content/uploads/2021/07/COP26-Explained. pdf

[ii] https://public. wmo. int/en/media/press-release/climate-change-and-impacts-accelerate

[iii] https://www. gov. uk/government/news/adapt-or-die-says-environment-agency – The Environment Agency’s third adaptation report October 2021

 

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What should you be know about PAN data in PCI DSS?

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Narendra Sahoo (PCI QSA, PCI QPA, CISSP, CISA, CRISC) is the Founder and Director of VISTA InfoSec

 

Introduction

PAN Number or Primary Account Number as we call it is a very sensitive data often used when making online payments or transactions. Customers often share this data with merchants from whom they purchase products or services online. However, customers do expect the merchants and financial institutes to protect the data and prevent incidents of threat. Storing the PAN data for most merchants is a necessity as they may have a legitimate business reason to store cardholder data. But storing PAN data has its share of risk on a business’s network security. Over the years businesses have been storing this data on their server for easy and quick access without realizing the risk it holds and the impact it may have on business.

In fact, most of the data breach incidents that have occurred over the years are due to the storage of unencrypted PAN data on the merchant’s/Service Provider’s servers. While the PCI Council clearly states not to store PAN data yet most merchants for increased consumer convenience store PAN data on their network. Storing customer’s PAN data increases the security risk and, also increases the scope of PCI compliance. So, unless businesses have a legit commercial reason to store PAN data, should not store it. Covering more on this in detail we have today shared details about PAN data and PCI DSS that businesses must know to ensure compliance. So, before getting straight to it let us understand the term PAN Data.

 

What is PAN Data?

PAN Data is basically the 15 or 16 digit numbers on the front of your debit/credit card which is also known as the Primary Account Number. They are also called payment card numbers and are often found on payment cards like credit and debit cards. The PAN account number is printed or embossed on the front of this payment card. The PAN number is issued by customers to merchants at the Point of Sale (POS) that identifies the issuer and the cardholder account while making payments. Customers when making an online purchase share the PAN number to make payments online. These PAN details are used by the merchants to process the payments online.

 

How does PAN Impact PCI DSS Compliance?

Payment Card Industry Data Security Standard clearly states that merchants dealing with online payments or accepting credit/debit card payments must avoid storing sensitive PAN numbers. The PCI DSS Requirement 3 addresses the protection of stored cardholder data. So, considering the storage of PAN data will automatically increase the scope of PCI DSS Compliance for the merchants. This way merchants will have to take additional measures for securing the stored PAN data in the network.

Storing unencrypted PAN data on the network will increase the potential risk of breach and end up having a significant impact on business. It is therefore necessary to secure PAN Data in form of encryption or other techniques as suggested in PCI DSS requirements. Explaining the requirement we have shared the PCI DSS data storage requirements in detail.

 

PAN Data storage in PCI DSS

Merchants may at times for commercial purposes may have to store PAN Data in their server. For these reasons, they will have to take extra precautions and implement additional measures to ensure the security of data and compliance with PCI DSS. The PCI Council outlines the requirement of encryption of cardholder data stored with the merchant. However, it is important to note that not all elements of cardholder need to be encrypted when stored on the server. It is only the PAN data that needs to be encrypted, the rest of the Sensitive Authentication Data (SAD) such as Stripe Data, are not allowed to be even stored by merchants.

What is more important to know and understand about PAN Data storage is that the only times that PAN is not considered to be cardholder data would be when details such as the the cardholder’s name and/or expiry date are not mentioned.  But this does not really happen and so merchants will have to implement measures to secure PAN data. Merchants must equip their data network to deal with PAN securely especially when it is transmitted at the POS.

Moreover, PCI DSS requirement 3.4 states that all merchants must use one of the following techniques to render PAN unreadable. This requirement applies when the PAN Data is stored or when the data is at rest anywhere including portable digital media, backup media, and logs. The techniques of rendering the PAN data unreadable includes

  • Strong cryptography of the PAN
  • PAN truncation (removal of the middle digits),
  • Index tokens and pads
  • Key-management processes

PCI DSS requirement 3.3 specifically requires the PAN data to be masked whenever on display. So, this way, the only digits of the PAN that may be visible are the first six and last four digits. With this only authorized businesses with legitimate commercial needs can see the rest of the information.

 

Final Thought

Despite all the clarity given in terms of the possible threat with storing PAN data nearly 65% of the merchants continue to store unencrypted PAN data on their servers and network. Further, what adds to the problem is that merchants are not able to handle and appropriately secure these stored PAN and cardholder data. Understanding the importance of PAN data and securing them is crucial. This is to prevent incidents of breach and theft. So, the only possible way to prevent this is by implementing measures of defense for handling such sensitive data. Ensuring that the PAN is  protected using one-way hashing or truncation methodologies is one way of assuring the customer’s security of the cardholder data. This way it would also help businesses ensure maintaining PCI DSS Compliance and securing sensitive data.

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