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Retailers slow to adopt omnichannel payments – and implement fraud protection: studies

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Retailers are slow to adopt omnichannel payments – and to implement fraud protection at a time when digital transaction fraud is expected to grow quickly, according to a number of reports out this week.

A minority of retailers have fully introduced omnichannel payments, according to PCM Research and ACI Worldwide. In their study, Omnichannel payments for merchants: myth or reality? they found that only 21% of the 100 UK, European and North American merchants that took part in the study had completed an omnichhannel payments programme. Almost half (46%) had no plans to do so in the next year.

When asked what tools they’d like to offer as part of an omnichannel payment system, 63% said they were interested in alternative payments, while 53% cited mobile point of sale and digital wallets. When asked about whether their organisation was able to innovate, 50% said they were in the ‘early’ or ‘innovator’ stage, while the other half said they were technology followers. Asked why they were not moving faster into omnichannel payments, the two reasons that dominated were the need to make the business case and to find business backing for the funding required in order to implement.

Fraud and security were key considerations for many traders. Asked whether they had a common set of fraud prevention capabilities across all channels most (53%) said no and 39% yes while 8% were unsure. Forty-two percent said they did not have common payment security across all channels, while 49% did, and 9% were unsure.

The preferred implementation strategy for omnichannel payments had moved from in-house to a hosted SaaS model, likely driven by the increased complexity of payments as well as PCI compliance.

“The path to omnichannel payments is complex and can seem daunting, and merchants are at a crossroads with the number of technology options. However, those that embrace these types of disruptive opportunities to serve today’s anytime, anywhere consumers will come out ahead,” said Andrew Quartermaine, head of merchant retail EMEA at ACI Worldwide. “A frictionless payment experience for the consumer in any channel should be the goal of retailers and merchants.”

Meanwhile, a study from Juniper Research suggests that online fraudulent transactions will hit $25.6bn (£17.6bn) in 2020, up from $10.7bn (£7.4bn) last year. E-retail is likely to account for 65% of fraud, or $16.6bn (£11.4bn), by that date, with weak areas including buy online, pay in store and electronic gift cards. The sector is followed by banking (27%) and airline ticketing (6%).

Continuing migration online and to m-commerce will provide further incentives for fraudsters to focus on these channels, the report, Online payment fraud: key vertical strategies & management 2016-2020, argues.

Focusing in on mobile, Kount’s Mobile Fraud Survey 2016 questioned more than 1,500 respondents from sectors including retailing, and found that among merchants, nearly four out of 10 (38.5%) said their biggest challenge in managing fraud risk in the mobile channel lay in understanding if they had a mobile fraud problem in the first place, while 43% said they were unaware of the share of total fraud coming from the mobile channel. A large minority (42% of merchants) said it was ‘very important’ to be able to detect mobile transactions – down from the 46% who said it was important in 2011. More than a third (36%) of merchants thought existing ecommerce fraud prevention tools were suitable for m-commerce – that’s up from 28.5% in 2015.

Don Bush, VP marketing at Kount, said: “The overall picture is one where merchants seem to be prioritising payment acceptance and consumer experience at the expense of fraud prevention.

“In terms of understanding the risks of m-commerce fraud and the importance of mitigating them, we expected to see a rise in awareness. Yet what we have actually seen is a fall. This is a concerning trend.

“It would appear that merchants are still not prioritising fraud. We understand that it is vitally important to allow consumers to pay how they want and to give them a first class mobile commerce experience. But if merchants are also offering a first class experience to fraudsters then they are losing money and damaging their reputation.”

ACI Worldwide is hosting a webinar on May 10 at 4pm, BST to discuss its omnichannel payment findings.

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