Simon Chandramani, VP of Sales Card Processing, Europe at Paysafe
It is no secret that online businesses are committed to giving consumers more flexibility. But, as technological evolution drives the world of eCommerce to constantly redesign itself and competition from international market leaders intensifies, it’s harder than ever for online SMBs to remain competitive. Globally, it is believed that eCommerce giants such as Amazon have the financial and human resources required to put themselves at the cutting edge of any industry they choose. Indeed, some suggest they have their eyes fixed on running every small competitor out of business. Those unable to keep pace with the latest innovations in customer experience will inevitably fall away as their market grows.
It is key that eCommerce merchants offer the best experience possible at the checkout. Two ways to ensure this is to offer more payment choice at the checkout, and to maintain the highest levels of payment security while also offering as frictionless an experience as possible on any device.
Choice at the checkout is key
Research reveals that online businesses are committed to giving consumers as much flexibility as possible when it comes to their payment methods. Three quarters of businesses agree that offering an increased number of payment methods at the checkout is fundamental for success. This is a clear recognition that the payment ecosystem is fragmenting and consumer payment preferences are diverging away from a reliance on card payment methods to alternative solutions.
When surveyed in 2018, online businesses offered an average of four payment methods. However, this was projected to rise to six within two years. The alternative payment methods expected to become more available at the checkout during this period include online cash replacement systems (previously offered by 30% of businesses but anticipated to increase to 45%), in-app mobile payments (which will rise in adoption from 19% to 41%), payments by instalment (projected to grow from 16% to 28%), and subscription payments (which will be offered by 23% of businesses, up from 9%).
The rise in adopting cryptocurrencies was predicted to be the most significant change, growing from just 6% adoption in 2018 to 21% within 24 months.
In the age of seamless payments, security is still the priority
Online businesses are aware of the pressure to create a seamless payment experience for their customers. However, over half (52%) of them are also mindful that reducing friction exposes them to a higher risk of becoming a victim of fraud. Many eCommerce SMBs think fraudsters are targeting online businesses at higher rates than previously (74%), and 55% acknowledge that online card fraud is a growing issue for their business. Therefore, it’s not surprising that security (59%) is now the main factor online SMBs take into consideration when choosing which payment service providers (PSPs) to partner with.
Increasing the rate of declined transactions is not the solution either, which again is where partnering with a PSP who understands ways to reduce the number of false positives for fraud detection will benefit the business. On average, around one in ten transactions are currently declined (9%), an issue that many SMBs (57%) face, compared to those who view this as a satisfactory price to pay if it has a positive impact in reducing overall fraud (25%).
Another factor that is set to have a significant impact on whether online businesses will be able to offer secure, frictionless payments is the introduction of Strong Customer Authentication (SCA). This new regulation has the explicit aim of solving this issue i.e. making online payments more secure whilst simultaneously enhancing the customer experience. This will be achieved by using more data points to securely authenticate an online card payment passively and so reduce the number of transactions that need to be authenticated manually, for example with a password.
Although the SCA compliance deadline has been delayed in the UK (from September 2019 to March 2021), there is remains an impetus on eCommerce merchants to integrate 3DS2, the new card scheme standards for authenticating card-not-present payments that complies with SCA, as quickly as possible. For eCommerce SMBs, understanding how to do this efficiently is vital to futureproofing.
The focus on payment security has always been paramount, but for businesses it has now overtaken all other factors when selecting a PSP. This is a clear response to the growing requirement to implement frictionless payments securely to remain competitive. Most business believe PSPs are responsible for protecting against fraud (81%), however there are difficulties in determining the balance between improving security processes while making the customer experience as seamless as possible. Selecting the correct payments provider is critical in order to overcome this hurdle to future-proofing for an online business. By merchants responding to the demand from customers for greater choice and security when it comes to payment methods, they avoid falling behind delivering and remain competitive ever-changing consumer demands.