Protecting consumers from fraud is a tough balance for many businesses. Consumers may cancel their transactions when faced with several layers of security steps to access or create accounts, but without those layers of authentication, their data may become more vulnerable to criminals.
The 2017 Identity Fraud Study from Javelin Strategy & Research finds the number of U.S. online fraud incidents in 2016 hit a record high, affecting 15.4 million U.S. consumers, compared with 13.1 million the previous year, a 17.6% increase. (The 2017 figures are not yet available, according to the website.)
While fraud incidents are on the rise, most businesses are still ill-equipped to protect their customers’ data, according to the 2018 Global Fraud and Identity Report from Experian plc. More than 50% of businesses say they still rely on passwords as their top form of authentication, even though 65% of businesses say they have experienced the same or more fraud losses in the last year. This report surveyed more than 5,500 consumers and 500 banks, financial institutions, card and payment providers and online retailers in 11 countries. Online retailers made up one-third of the 500 businesses surveyed.
In the same report, 26% of consumers say they abandoned a transaction because they were required to create an account for a one-time purchase or because a company required too much information for a new account, while 27% abandoned a transaction due to a lack of visible security.
Based on these figures, it makes sense then that 75% of businesses say they want advanced authentication and security measures that have little or no impact on the digital customer experience, creating a seamless shopping and checkout experience.
“Businesses are forever grappling with the tension between managing fraud and maintaining a positive customer experience,” the Experian report says. “In most cases, the latter wins out, as evidenced by their willingness to accept higher fraud losses from authentication protocols that they concede might be deficient, but do not disrupt the user experience.”
Although 75% of businesses say they would be very interested in more advanced security measures and authentication, lack of resources and budget constraints are the top reasons they have not adopted more advanced authentication methods.
Additionally, 67% say that an undetected fraudulent transaction is costlier to business than a transaction flagged as fraudulent that was not. However, 69% of businesses are concerned with the number of incorrectly declined customer transactions. “That concern likely stems from the possibility of lost revenue, lost potential new customers and a compromised experience for existing customers,” the report says.
Most business leaders surveyed, the report says, declining to list a specific number, agreed that consumers would need an incentive to change or adopt new security or authentication measures—or more well-known brands with a large reach need to adopt more advanced authentication or other security measures so consumers get accustomed to them.