To meet high customer expectations and compete in a post-pandemic commerce ecosystem, it’s important for brands to prioritize customer experience (CX) and allow a variety of quick and easy payment methods. Brands that fail to streamline the customer experience and put such measures in place are at risk of falling behind those that do.
But aligning with the adoption of these new payment methods will require tackling the objections and potential issues that come with them—and unfortunately, those issues can quickly add up.
The rapid adoption of alternative payment methods has opened companies up to fraudulent opportunities. According to Javelin Strategy & Research, there’s been a 35% increase in fraud attempts since before the pandemic.
42% of global transactions use alternative payment methods, and this number is set to increase. In fact, online purchasing is predicted to account for 95% of purchases by 2040, which will undoubtedly bring a wealth of new and interesting ways to pay as the global shopping landscape shifts online.
At the moment, there are four popular alternative payment methods:
The various methods listed above are relatively new to the payment world. Some are more modern than others, and there’s often confusion about the risks associated with them. This is understandable when you consider the anonymity of the internet and how people can hide behind a screen.
Unfortunately, the uptick in alternative payment methods has led to a rise in fraudulent transactions since it’s harder to prove the identity of someone online.
Here are some of the most common fraudulent opportunities we’re seeing take over the online payment world.
This is one of the most common fraudulent activities that can wreak havoc on a business. Essentially, customers place an order with a merchant but later contest the charges, resulting in a chargeback or claim for the merchant.
If the customer has already received the product or service, the brand loses out on the money that’s given back to the customer, as well as the shipping costs and any other costs involved.
Such fraudulent activity is particularly disastrous for brands that sell intangible products or services because many payment services don’t offer protection for them.
Fraudsters using stolen credit card information isn’t a new thing. But fraudsters stealing credit card information and storing it on their phones is a new phenomenon.
The introduction of digital wallets makes it easy for criminals to keep card information without having the physical card in hand. This means they can use their phones to commit fraudulent purchases until the card’s original owner wises up to their antics.
These new alternative payment methods haven’t been around long enough for companies to understand the real risks (and benefits) involved with them.
Most companies have strong policies for cutting checks and making Automated Clearing House (ACH) payments, but very few have expanded these policies to include alternative payments. As such, there is ample room for fraudsters to carry out criminal transactions and steal the payment information of other customers.
Don’t let the wave of fresh fraud risks get in the way of growing your business. For most merchants, the benefits of having a number of payment options for customers far outweigh the risks. Customer experience is crucial today, particularly when most purchases are online.
Instead of avoiding alternative payments altogether, here’s how you can put precautions in place to reduce the risk of fraud while still creating an enjoyable customer experience.
Alternative payments are a must for businesses that want to reach a wider customer base. They can improve the customer experience and help shoppers create a streamlined buying journey.
However, they bring with them their own risks. The increase in digital payments since the coronavirus pandemic has led to an increase in fraudulent transactions via digital wallets and payment methods. The key: Be aware of the potential fraud opportunities that come with these methods and put precautions in place to avoid criminal actions.
Rafael Lourenco is Executive Vice President and Partner at ClearSale, a card-not-present fraud prevention operation that helps retailers increase sales and eliminate chargebacks before they happen. The company’s proprietary technology and in-house staff of seasoned analysts provide an end-to-end outsourced fraud detection solution for online retailers to achieve industry-high approval rates while virtually eliminating false positives. Follow on LinkedIn, Facebook, Twitter @ClearSaleUS, or visit https://www.clear.sale.