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The Impact of MFA on Customer Experience



Written by Maddie Vagadori, Solutions Consultant, Forter and Alyssa Huitema, Solutions Consultant, Forter

With constant news of data breaches exposing user credentials, traditional username and password authentication is not secure enough. According to a Spycloud study at the beginning of 2022, 64% of users repeat passwords and apply the same set of credentials across many sites, giving bad actors relatively easy ways to gain unauthorised access to their accounts. The National Cyber Security Centre (NCSC) recently published guidance for retailers in particular to “move beyond password authentication” – in order to protect both brand reputation and customers.

This rising threat underscores the importance of protecting digital identities — ensuring a user is indeed who they say they are prior to granting sensitive access. Multi-factor authentication (MFA) is the industry-standard for securing accounts and supplementing traditional username and password authentication, adding a second layer of defence. There are three main buckets of factors:

  • Something you know (e.g., security questions)
  • Something you have (e.g., a text message sent to your device)
  • Something you are (e.g., biometric authenticators)

MFA drastically reduces the likelihood of account takeover, safeguards sensitive data and makes consumers feel like their online information is more secure. But MFA is not infallible, and not all factors are created equal, as there are varying degrees of man-in-the-middle resistance, susceptibility to social engineering, etc. Moreover, attackers are reaching new levels of sophistication that transcend what passwords and MFA can effectively handle.

Indiscriminate use of MFA can also cause customer frustration and abandonment. In an environment of shrinking attention spans and heightened consumer expectations, a friction-filled authentication flow can lead to significant churn.

MFA solutions have become more adaptive in nature as many efforts have been made to bridge the gap between security and usability. A combination of rules is often used to inform when to prompt for MFA (e.g., prompt based on device, IP, or geolocation). The ultimate goal is to give users the experience they deserve; optimising account-specific experiences for good customers while thwarting bad actors.

3DS and PSD2 in EMEA

Customer authentication and MFA have not just become accepted practices in online eCommerce, they’ve also been codified into law in various regions and countries. In 2015, the EU introduced PSD2, a revised directive intended to regulate payment services and protect consumers throughout the EU and European Economic Area (EEA). The most important component of PSD2 is the requirement of Strong Customer Authentication (SCA), which means that a consumer must be authenticated using additional methods or parameters. One of those methods is called 3-D Secure (3DS), which was introduced as a secure authentication method for online transactions.

3DS allows an issuing bank to try and authenticate the buyer on the merchant checkout page. A successful processing of a 3DS transaction shifts liability from the merchant to the issuer. And while there have been some improvements made to 3DS (3DS2 v. 3DS1), it’s not exactly a “silver bullet.”

Some positives to 3DS are that it provides an added layer of security, shifts the liability off the merchant, raises a shopper’s confidence in their online security and allows merchants to maintain compliance under regulations like PSD2. But there are drawbacks; it can cause added friction in the consumer’s journey, which can lead to cart abandonment and false declines. Forter’s projections warn that merchants who apply 3-D Secure (3DS) authentication to all of their UK transactions are likely to lose 8-10% of revenue due to 3DS authentication failure, and authorisation failure.

In this current economic climate, it is perhaps even more important for retailers to minimise friction and reduce lost revenue. Merchants who take a blanket approach and deploy 3DS to everyone are losing up to 30% of transactions to failure or abandonments. But when 3DS, like all MFA, is applied intelligently, the positives far outweigh the negatives and merchants have the opportunity to reduce lost revenue by up to 80%.

Where are we? How can we improve?

Thanks to Forter’s vast network and close working relationships with our customers, Forter was able to leverage data and enumerate trends in security/identity incidents. In 2021, there was a 109% increase in fraudulent accounts created around the world, with up to 4% of attempts to create new accounts being fraudulent attempts. With regard to customer experience, 19% of consumers stated they would not shop at a retailer again if their personal information was hacked.

But there is a way forward: when merchants reduce or remove authentication friction, it leads to an increase in conversion rates by more than 35%. More importantly, it makes a consumer feel that their online security is taken seriously and only solidifies and strengthens a long-term relationship with your business.

Looking ahead

The pandemic-accelerated shift to eCommerce has increased the opportunities for fraudsters. Sophisticated bad actors are more than capable of circumventing two factor authentication (2FA) by spoofing mobile phone numbers to intercept the one-time-passcodes needed to verify transactions. We are also seeing fraud-as-a-service proliferating as fraudsters monetise their efforts, offering simple access for low-skilled criminals.

In the next 3-5 years, when PSD3 is forecast to be implemented, the digital payments legislation must simultaneously raise fraud prevention capability to a level commensurate to the escalating threat, but crucially without compromising the buying experience for genuine customers. It should add a level of flexibility for the entire payments’ ecosystem, allowing customers and merchants control over how transactions are secured. And the speed at which the eCommerce environment is evolving strongly suggests that PSD3 should be scoped and defined as quickly as possible, to avoid becoming obsolete before it can be implemented.


How app usage can help brands increase their online revenues and customer retention



Arunabh Madhur, Regional VP & Head Business EMEA at SHAREit Group


Brands are continuing to invest heavily in the e-commerce market despite current market and economic challenges – and they need to. Indeed, the current global e-commerce market is valued at around $5.5 trillion. Further to that, estimates show that online retail sales will reach $6.7 trillion by the end of 2023 – and e-commerce making up 22.3% of those sales.

So despite the economic and market climate, businesses must still plan for success and cater to customer demands to make the most of the global e-commerce opportunity.


Mobile apps are key

Mobile apps are now a fundamental component of retail, as they provide customers with a convenient and engaging way to shop from their phones. The past couple of years has been rocket fuel for digital transformation, providing an opportunity for the retail industry to innovate. Whilst global trends continue to point to the user growth of Facebook, TikTok and Instagram, the trends underneath the headlines highlight significant opportunities to drive new customer acquisition, which in turn demands a targeted customer retention strategy from companies.

According to research from Baymard Institute, 69.82% of online shopping carts are abandoned and with demand expected to continue, pressure is growing on retailers to expand current offerings and create personalised experiences to tackle this. One of the big challenges e-commerce companies face, though, is analysing and maximising the behaviour of users, and bringing down the cost of their marketing and engagement against how much is earned through a customer making a purchase.

To meet customer demand, mobile apps offer a variety of features such as push notifications, product recommendations, exclusive discounts and offers, and easy checkout processes, to make the shopping experience easier for customers. By leveraging the power of mobile technology, brands can create an immersive shopping experience tailored specifically to their customer’s needs, and this in turn helps increase customer loyalty, customer return rates, and maximise online revenue.


Re-targeting and re-engaging customers

Brands should focus on re-engaging with returning consumers through a personalised strategy as this can help increase the lifetime value of users, which in turn helps brands bring the cost of their marketing down knowing that brand loyalty has been achieved. According to research from Google and Storyline Strategies study, 72% of consumers are more likely to be loyal to a brand if they offer a personalised experience.

Optimising the online shopping experience is crucial in retaining customers. Today, consumers need a more ‘human’ touch, i.e., smart product suggestions based on buying history & behaviour that helps build a one-to-one relationship between brand and buyer. In particular, push notifications haven’t just enhanced personalisation but also increased app engagement by up to 88%. Push notifications have also proven to get disengaged users back, too, with 65% returning to an app within 30 days of the push notification.

Another strategy to consider is the option of adding buy now pay later (BNPL) options at checkouts for customers. Brands that add the option of financing at the checkout allow customers to spread the cost over time, which according to Klarna has resulted in a 30% increase in checkout conversation rates.

Publisher platforms allow brands to leverage their reach and sticky user base. Especially with open platforms such as SHAREit, which can help e-commerce brands create a strong revenue conversion with higher average order value with unique retargeting and user acquisition solutions. Because users are not just sharing product links, but also sharing e-commerce apps and deals among their community. Users of these publisher platforms are also encouraged to share products and apps through platform activities.


What the future of e-commerce holds for brands

E-commerce is positioning itself as a key facet in retail, and its future. With Advancements in technology, customers can access various products and services worldwide through their smartphones – making shopping more accessible than ever. Brands must put consumers at the heart of everything they do, like never before. Offering incentives and payment options, personalising customers’ experiences and re-engaging them, as well as targeting new customers, in an effective and un-intrusive way, are all ways in which they can influence purchasing decisions and improve retention figures.


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Does the middle market have a financial edge?  



Ilija Ugrinic, Commercial Solutions Director at Proactis


Companies tend to look up the ladder when searching for ways to improve efficiency and business performance. What are larger competitors, or others outside their industry, doing right that they can learn from and implement?

What smart technologies or bright ideas do they have that could create efficiencies for them, too?  

As we enter yet another likely volatile year for business, punctuated by recession, should businesses continue to only look up? And could the approach of a slightly smaller business offer more of a competitive edge? 

Large corporates tend to pioneer innovation in automation by simple virtue of the resources they have. Home to transformation directors and departments, with the ability to implement large overarching software systems, they pave the way for others and are often the first to digitise their source-to-pay cycle at pace. 

Ilija Ugrinic, Commercial Solutions Director at Proactis

While growing businesses understand the merits of full automation, implementing it is often too expensive and it doesn’t bring the rapid realisation of benefits that they need. They need to consider what will bring them the biggest return on investment – and the reality is that those in the middle market don’t necessarily need all the elements of an ‘all-doing’ piece of software. What’s more, without dedicated personnel to project manage a transition, they frequently lack the currency of time to be able to comfortably transform working practices, and take staff with them on the journey, without taking resource from other areas of the business.  

For SMEs, digital transformation has never been quite as seismic a shift. Instead, they tend to take a modular approach, employing digital solutions only for particular areas of their finance department, where they need them. This has never been a particularly strategic move. Rather, for a growing business that values quick results and watches their outgoings with greater scrutiny than their larger counterparts, it’s something that suits them better. A modular approach also comes with very little disruption and can be implemented relatively seamlessly into their existing organisational setups. 

But while growing businesses are opting for a modular approach because it’s the most cost and time effective option for them, the benefits go far beyond that. The beauty of a modular approach is that it is agile. The last three years – with pandemics, an increasingly challenging climate and shifting geopolitical tensions impacting our global economy – have only served to remind us of how suddenly, and drastically, a business landscape can change. The companies that have weathered the storm are those that have reacted and adapted quickly – those that have been capable of changing the way they do things with little impact on day-to-day operations. A modular approach can offer just that.  

Businesses using modular finance technology can integrate small solutions that sync up with the rest of their processes, quickly and seamlessly – and these systems can be integrated into their existing Enterprise Resource Planning (ERP), too. There’s no restriction of a monolithic or aging piece of software either – finance teams can add and update small solutions to their daily operations without the upheaval of having to replace or update large IT infrastructures or wider working practices within the business to accommodate the new software.

Unrestricted by entrenched and hard-to-change systems, the speed with which SMEs are able to react to market changes is miles ahead. A prompt software add-on to manage risk, or create a quick fix in response to a market shift, can be virtually a knee-jerk reaction. SME’s abilities to bend and flex to today’s world efficiently is seeing them reap the benefits of a modular approach. It’s lean, it’s fast and it’s facilitating their growth with a strong competitive edge. And as some of these companies’ growth propels them into the large corporate sphere, they’re choosing to keep a modular approach to finance.  It will certainly be interesting to watch those middle-sized companies which grow to the extent that they find themselves competing in the same space. With no financial remodelling to assume a large ‘all-doing’ piece of software, they’ll be competing against their counterparts with completely different tools in their arsenal.  

With technology, working life and business needs continuing to change day to day, we have another year ahead of us that will see companies running to keep pace with each other – and fast-growing companies’ approach to finance could be the silver bullet that enables them to catch up with, and even take on, big enterprises. It might just give them a competitive edge against large corporates in these turbulent times.

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