At first glance, e-wallets have all the qualities needed to facilitate faster and safer transactions. As merchants continue to optimize their customers’ omnichannel marketing experiences, e-wallets have made it easy for consumers to ride the wave. Major companies like Google, Microsoft, Apple, and Samsung were early-movers, offering digital solutions that allowed consumers to make purchases without swiping a card.
Then why is it that a recent Experian survey found that only 1 in 10 millennial consumers use a digital wallet for all their daily purchases? Further, why do older generations avoid using it altogether? That same Experian study found that only 25 percent of consumers had used a mobile app to make a payment. This article will explore some of the reasons why.
Security Concerns Remain Paramount
Consumers raised with cash and credit find it a hard habit to break. They’re more comfortable using cash or a payment card and receiving a physical receipt, which is not surprising. What is less obvious is the value these consumers place on cash-back benefits and rewards offered by their branded credit card, something that mobile wallets don’t offer.
Most of all, consumers fear that digital wallets are not secure. Most are unaware that many digital wallet solutions employ tokenization strategies to protect them from cybercriminals. Anyone following the news sees the frequency and devastating consequences of data breaches. This creates a dilemma for merchants who must respond to consumer demand for frictionless shopping experiences, while reassuring them that their payments solutions will protect their information from hackers.
According to a survey by consulting firm Deloitte, the two main reasons Americans have been slow to adopt mobile payments are data security concerns and lack of awareness about the technology’s benefits. Security concerns are very real, because e-wallets are vulnerable to a wide range of fraud techniques. Examples include:
Identity theft: Hackers acquire sensitive data not properly protected and use the stolen identity to make online and card-not-present purchases. Fraudsters also steal the actual mobile devices and use them to make purchases.
Velocity attacks: A fraudster continuously submits a credit or debit card for unauthorized purchases until the card number is verified.
Device spoofing: Fraudsters impersonate a real customer’s device or attempt account takeovers through phishing schemes, which trick consumers into clicking on malicious links.
Merchants can take a variety of steps to prevent e-wallet fraud:
- Differentiate e-commerce fraud from m-commerce fraud: While the end result may be the same, it is important to understand the scope of fraud in each channel. Take a close look at fraud attempts and categorize by channel, then select and implement the most effective security programs that provide optimum coverage.
- Incorporate multi-factor authorization: Whether it is fingerprints, other biometric authorization, identification questions or CVV codes, multi-factor authentication will reduce the success rate of identify fraud attempts. Consumers are willing to use these methods to protect their data, provided they don’t significantly slow down the transaction process.
- Stay on top of customer behavior: Know your customers and be on alert for suspicious behavior, like large purchases or an unusually large number of transactions over a short period of time.
- Share data with issuing banks to detect and prevent fraud: By making transaction data or customer purchase history available, merchants enable issuing bank call center staff to have the information needed to prevent chargebacks, by answering legitimate consumer questions or identifying fraud. Real-time collaboration and data-sharing is one of the most effective tools to reduce fraud.
Because of the many benefits to merchants and consumers, e-wallets will inevitably gain wide acceptance over time. When consumers feel confident that their data is secure, they will embrace advances in e-wallets that enable fast and easy payments, secure money transfer, and safe storage of their funds. As long as security solutions keep up with new payments technology, it is only a matter of time before e-wallets become the primary way consumers make purchases.
Contact us to learn how Verifi enables collaboration between merchants and issuers to distinguish legitimate transactions from fraud, protecting themselves and their customers.