Consumers are spending an increasing amount of time online. So much so, almost 30 percent of Americans admit they are “constantly online.” Along with more time spent online, consumers have also developed much higher expectations around their digital experience. Yet, this can be at odds with some of the new privacy and security regulations, such as the European Union’s PSD2 initiative and Strong Customer Authentication (SCA). SCA, specifically, appears to be one of the most comprehensive global efforts to bring more security to online payments and eCommerce organizations and their customers, but it also brings the potential for more friction.
If you aren’t currently a cross-border company, you may feel like this doesn’t apply, but rest assured these regulations will come across the pond soon enough. We see this already with the new California Consumer Privacy Act (CCPA), where elective adoption by businesses such as Microsoft, have made it the default privacy standard in the U.S.
To prepare for impending customer privacy rules, companies have to build a payment authorization process that promotes more secure transactions, without increasing false positives. However, equally as important is maintaining frictionless customer experiences. A recent research study of 7,000 consumers across North America and Europe revealed a majority of consumers expect a process that is fast, secure, and efficient. Businesses must pay close attention to these consumer needs or risk losing out to the competition.
Some of the findings from the research that will help guide businesses forward, include:
- There’s a new “F word” – The most feared “f word” in the industry is no longer fraud, but friction. This was validated by an overwhelming majority (92 percent) that expect a fast, frictionless experience. Moreover, three quarters do not have patience for sub-par digital experiences due to alternative options available in the marketplace. That may be why an astounding 66 percent have abandoned their account opening or transaction on at least one occasion due to friction. Seventy-three percent of consumers say that when they are trying to create an account or process a transaction on a modern digital platform the process should happen instantaneously.
This high standard is why forward-looking businesses are placing a frictionless digital experience at the centre of their digital strategy. And the keys to seamless digital transactions are machine learning models, the quality of the data used in the models, and the use of pre-authorization risk screening for online card transactions. Over time, a good pre-authorization process can save money for businesses by reducing manual review time, step-up authentications, and payment processing fees.
- Privacy and security remain the top focus – As we see increased regulatory initiatives for consumer protection, like GDPR in Europe and CCPA in the U.S., companies will need to embrace the regulations and elevate their privacy practices to support them. With the record number of data breaches in 2019, it is not surprising that consumers are concerned. Nearly 40 percent have personally had their own identity stolen or been the victim of fraud, and a large majority (90 percent) are concerned that they will be the subject to fraud in the future.
Consumers are paying much closer attention to where their personal data may live online and how it is being used. More than 61 percent believe the responsibility for avoiding fraud lies with the companies that have access to their personal data. If consumers do experience fraud on a company’s platform, 91 percent say they likely won’t use that company again in the future. Companies that elect to meet new regulation requirements, such as, CCPA, will gain an advantage with customers, earning their trust and loyalty over other laggards.
In this digital world where large-scale data breaches are practically routine, consumers know their personal data is online already. Being able to trust companies and their digital platforms has never been more important for consumers when they are deciding where to spend their hard-earned money.
- Digital identity verification (DIDV) practices are becoming a cornerstone of trust – How much do consumers know about digital identity verification? Turns out, not very much. Only 12 percent admitted completely understanding what it is and how businesses use it. Yet, it’s something that all consumers are subjected to at some point when they are looking to set up accounts or make transactions online. Interestingly, over half (52 percent) said how companies verify their identity influences how much they trust them.
To implement DIDV without impacting the customer experience, security needs to be added “behind the scenes.” This can be done through smart use of emerging technologies and methods such as machine learning and intelligent risk modelling. Many companies are shifting from rules-based systems to more precise decisioning that relies on machine learning (ML) models to help accomplish this. This will subsequently require companies to invest in third party models and data or build their own models for optimal performance and more control over their customer experience.
Overall, the survey clearly conveys that consumers are unwilling to compromise. They demand speed, convenience, and security when it comes to their digital transactions. This puts pressure on companies to build customer trust with a smooth, yet highly secure experience from the very first interaction. Companies that can deliver on all three fronts will earn the loyalty of today’s savvy consumers.