Evan Schuman is a guest contributor to the Sift Science blog.
When it comes to payment fraud fears and shopping behavior, there’s a big difference between what people say, and what they actually do. For example, studies show that debit card use is on the rise —despite the fact that the absence of zero liability protections for debit means that credit cards are much safer overall. Those same consumers will tell surveys that they would never shop with a retailer who has suffered a major data breach—and yet those retailers never sustain a detectable drop in revenue.
A new fraud perception survey, from the Auriemma Consulting Group, adds a few more illogical fraud reactions to the list – including some that could affect the rate of mobile payment adoption.
Here of some my favorite findings from the new report:
Consumers are more comfortable adding security to higher-dollar purchases
Survey respondents are more likely to value security over speed when a purchase is more expensive. This is despite the fact that, statistically speaking, an exponentially greater risk of having your information stolen exists when you make numerous smaller transactions. Besides, fraud risk has nothing to do with the dollar value of the transaction where they grabbed your card credentials. It’s the purchase limit on that card that matters. It makes no difference if the thief grabbed your Visa with the $25K spending limit when you bought a $1 pack of gum or a $5,000 refrigerator.
“When asked about a hypothetical $100 purchase, 85% agreed that security is more important than speed. In the case of a $5 purchase, however, that drops to 70%, with 30% who want that transaction to be fast, ‘even if it means fewer security steps’,” the Auriemma report said.
“The importance of security seems to fluctuate according to purchase amount,” said Jaclyn Holmes, the senior manager who directed the study. “In reality, the amount of the purchase has nothing to do with a fraudster’s ability to steal a consumer’s information, but consumers tend to care more about speed than security for smaller transactions.”
Consumers believe labor-intensive = better security
And therein lies yet another consumer misperception. That’s the idea that the longer and more labor-intensive a security mechanism is, the more secure it is. At least this one is based on logic and human nature. It’s like thinking that the more pain an exercise causes, the more good it’s doing. Or that the worst a food tastes, the better it must be for you.
Security systems—and particularly authentication systems—have improved a lot in the last few years. Indeed, they’ve improved to the point where better security doesn’t necessarily have be more time-consuming or laborious. But consumers stick to their more-pain-more-gain perceptions.
According to the Auriemma research, consumers are distrustful of mobile payment systems because they seem so simple that they can’t be secure. Marianne Berry, an Auriemma managing director, believes that mindset may make it harder for mobile payments to gain mass acceptance.
“When asked to choose the most secure payment method, 42% of survey respondents chose chip cards, 3X the number that chose mobile. Most early adopters of mobile payments have some understanding of the concept of tokenization and view it as a very secure way to pay,” Berry said. “But in the general population, mobile’s speed and convenience can equate to being less safe. To convert non-users, marketing messages should highlight how mobile pay transactions mask the payment card information. Consumers need to hear that it’s just as safe as a chip card transaction, but faster—and a lot more fun.”
OK, “a lot more fun” may be stretching it. After all, consumers don’t enjoy making payments. Buying something, sure. But paying for something? Better to hide the payment process altogether. The closer the payment gets to effortless, the better.
How mobile payments can win the fraud perception game
The truth is that mobile payments—both through Android and Apple iOS devices—are more secure and safer for many reasons. For starters, unlike all of today’s systems involving card swipes/dips, mobile transactions do not leave a copy of your payment credentials with the merchant. If that merchant gets breached, your payment details get stolen and then sold to the highest bidder. With NFC transactions, that data stays with the processor. I’ll trust the security of a payment processor over a random merchant any day.
Plus, major NFC services like Apple Pay routinely deploy robust encryption processes. That all said, one can’t win a reality-versus-perception argument by citing stats to support reality. Consumer perceptions have to be addressed, and that’s where all payment players—including merchants—have a strong incentive to work together. Widespread mobile payment acceptance promise major benefits for all players, including easier rewards and other incentive programs.
The best approach? Create a zero liability program just for mobile payments. Provide guarantees of zero-fraud-cost risk to consumers when using a mobile payment system. In truth, the cost would come in protecting debit cards, as these protections already exist for credit cards. Unfortunately, debit generally involves a lower interchange fee from merchants. That means that merchants would have to cough up extra dollars to make up the fraud-guarantee loss. Or else get the banks to pick up the load.
Given how much all players here have to gain from mobile payments succeeding, it would seem a worthwhile investment. But then again, consumers don’t have a monopoly on failure to yield to logic.