Juniper: Retailers brace for $71 billion card-not-present fraud loss
With fraudulent card-not-present (CNP) transactions on the rise, losses will become staggering over the next five years.
Retailers stand to lose $71 billion globally by 2022, driven by a number of factors, such as the United States' shift to Europay, MasterCard and Visa (EMV) chip cards, delays in 3DS 2.0 (3D-Secure) and click-and-collect fraud. This was according to “Online Payment Fraud: Emerging Threats, Key Vertical Strategies & Market Forecasts 2017-2022,” a report from Juniper Research.
By 2022, fraudulent CNP physical goods sales will reach $14.8 billion annually. Click-and-collect services are particularly vulnerable, given the lack of a mandatory residential delivery address. Yet, retailers remain reluctant to impose rigorous identity checks on order pick-up for fear of damaging the consumer experience and reducing conversion rates.
Meanwhile, many merchants perceive combatting fraud as too expensive. Consequently, they have been ill-prepared to deal with the shift to online fraud following the introduction of EMV (chip and signature) payment cards in the U.S. In most instances however, merchants would receive value from their investment.
For those companies that are taking steps to fight back, three key battle-grounds are emerging in the fight against fraud. By 2018, machine learn-ing will emerge as a key tool in identifying genuine users. The increased shift to mobile e-commerce will also increasingly rely on 3DS 2.0, a mes-saging protocol to enable consumers to authenticate themselves with their card issuer when making CNP e-commerce purchases. Biometrics usage will also accelerate, the study revealed.
"2018 will herald the arrival of new tools in the fight against fraud", said Steffen Sorrell, senior analyst, Juniper Research. "3DS 2.0 will finally begin to rollout and will mark a paradigm shift in terms of merchants and issuers leveraging shared data. We also expect passive biometrics, such as the manner in which a device is handled, to become key in the future."
AmEx: Digital security concerns influence purchase behavior
Merchants may be losing out on potential e-commerce sales due to shoppers’ concerns over the security of their information in the digital world.
Of consumers who have made three or more online purchases in the last year, 37% abandoned a purchase because they did not feel their payment would be secure, according to “The 2017 American Express Digital Payments Survey.” The report, based on responses from 1,020 U.S. consumers and 401 U.S. merchants, revealed that the level of fraudulent online sales has increased or remained the same over the past year for 73% of merchants.
In the past year, retailers spent 31% of their IT budgets on payment security. More than half (54%) reported that their budget for payment security will increase over the next year.
Retailers are also taking additional steps to boost digital security. More than half (53%) of merchants require customers to enter the CVV code found on credit cards for online purchases. Meanwhile, 42% of retailers feature technology to confirm customers are not robots, or utilize data encryption (40%). Four-in-10 (39%) merchants decline transactions when a verified billing address has not been provided. Only 38% of merchants require customers to set up an account before making a purchase online.
“Digital innovation is enabling consumers to buy from merchants when and where it’s most convenient for them,” says Mike Matan, VP, industry engagement, product and marketing, Global Network Business, American Express. “But the results of our survey show that for merchants to capitalize on consumers’ continued shift to online and mobile commerce, they need to provide their customers with the confidence that their information is secure.”
Despite their concerns, however, shoppers are continuing to use digital channels. Nine-in-10 (90%) consumers said they have made at least one online purchase in the past 12 months, and 73% have made three or more online purchases in the same time frame.
Nearly half of online shoppers (47%) said they have increased the frequency of their online purchases in the last year. And 71% of merchants said the proportion of their annual sales generated through online and mobile channels has increased over the previous year.
Shoppers are also using more digital payment options. More than 70% of online shoppers have used digital-payment services, including mobile wallets, one-click checkout buttons and P2P payment apps. Four-in-10 (41%) said they always or sometimes use such digital solutions when they pay.
Internet-connected devices are also poised to further shape consumer purchasing behavior, as 18% of consumers said they are very likely or somewhat likely to use voice-activated services to make a purchase in the future, the study reported.
In other survey findings:
• Among the 71% of merchants that have experienced an increase in online and mobile sales over the last year, more than half (58%) said that enhanced security features have had a very significant impact on their sales.
• Other factors significantly impacting their sales include an improved checkout process (54%), the availability of free delivery (55%), marketing offers and discounts exclusively for online customers (53%), and a general consumer shift toward online shopping (54%), data revealed.
Regional grocer improves workforce efficiencies
Lowe’s Foods is taking steps to increase efficiency across its workforce.
The grocer is adopting enterprise labor planning and workforce management solutions from Logile across the chain’s nearly 100 stores operating in the Carolinas and Virginia. The solutions will help the grocer generate more accurate sales and labor forecasts, and improve scheduling at the task level across all store departments.
“The increased efficiency and more precise staffing will allow our hosts to spend more time engaging with guests and in making their shopping a true pleasure and not a task,” said the chain’s senior VP, Mike Clawson.
Lowe’s corporate and store leaders also worked directly with Logile’s re-tail industrial engineers to implement various efficiency principles in all stores. These included 5-S workplace organization, a method that organizes a work space to improve efficiency and effectiveness, and efficient work methods to foster more efficiency across the workforce. The grocer also added engineered labor standards, or defined timelines for associates to complete specific tasks.
“The results of our collaboration will yield greater productivity, customer service, safety, and host job satisfaction and personal ownership,” said Jamie Edwards, manager of labor scheduling at Lowe’s Foods.