For retailers online fraud is one of the most difficult problems to get under control. From a consumer perspective, it can be very frustrating when you have to enter a lot of personal information before you can actually pay for something online. Can you imagine you are at the cashier at a high street retailer and you are about to pay for something, but instead you are being asked to fill out a form with your name, password, shipping address, age, phone number, credit card number, valid date, cvv code, your mother’s middle name and even the name of your first pet (in case you lost your password!).
When you travel abroad, fraud management might even go one step further. If you purchase something online, you might be asked to email or fax your scanned photo id, credit card, a utility bill (provides information about fraud size and address) or provide a specific code from your bank statement. This is the classic case of ‘false positives’, you want to pay for something but you can’t, for some reason the system does not match up your location with the credit card details or there is a problem with your IP address.
If that would happen to you, you would probably walk away in frustration! The store would lose the deal and might lose you as customer forever. High street retailers seem to be on top of the situation in the offline world with Chip and Pin and other technologies – but simplicity and fraud is still not solved for the online world.
The US department of Commerce announced in February this year that the estimate of US ecommerce was $44.1 billion for the fourth quarter of 2010 – an increase of 5.6 % from the previous quarter (WSJ, February 17., 2011). The numbers are increasing, however looking at the payment processes behind it consumers still have to go through a painfully long process every time they shop online. Let’s not forget, mobile shopping and payment will also be a critical factor in the near future, once shopping will be fully accessible on the mobile.
We have seen that online merchants lose a lot of customers in overcomplicated checkout processes. In some cases up to 50% of the customers drop out at the payment page. Remember, this is a customer that has already chosen a product or service and is ready to pay for it!
Fraud will continue to be a major issue for online merchants that’s why extensive fraud management will always be required. For customers and merchants, the key question is how to make payments more secure and easier at the same time?