In this blog post, Michael Grillo, director, Marketing Line Leader, Merchant Solutions at ACI Worldwide, talks about the impact of fraud on a consumer and what it means for their relationship with their bank, and highlights that the fight against it requires a collective effort.
Today’s consumers have become acutely aware of fraud and how it impacts their day-to-day life. In fact, it’s probably safe to say that you or someone you know has been a victim of fraud.
Mainstream media continues its ample coverage about breaches, compromised personal data, stolen credentials and related stories about fraud—while the increasingly digital world has become a playground for fraudsters seeking their next opportunity to pounce.
With greater visibility to these types of major fraud events, are consumers becoming desensitized to the impact of fraud?
A recent report from Aite Group1, “2016 Global Consumer Card Fraud: Where Card Fraud Is Coming From” indicates that nearly one out of three people globally have experienced fraud in the last five years. Geographic and regional differences abound. Late-comers to EMV, like Mexico, Brazil and the U.S., experienced higher fraud rates, while their European counterparts—where EMV has been in place for many years—report lower or more moderate fraud rates.
The research also states that more than half of the consumers exhibit one risky behavior – like leaving one’s smartphone unlocked, keeping a PIN number with a card and using a laptop or computer without security software. Does the risky behavior indicate that people don’t care anymore if their financial or personal data is stolen?
The same survey indicates that following an instance of fraud, 40% of cardholders use the replacement card less, one out of five will leave a financial institution based on how they are treated during and after a fraud incident and one in ten consumers lack confidence in their financial institution to protect them from fraud. On one hand the consumer can be lax and not take preventative measures against fraud—but will then penalize the institutions who fail to protect them from their own risky behaviors.
There are other factors which impact loyalty, some of which can be attributed to geographic or regional norms and other behaviors which are influenced by regulatory realities. For instance, in the US, a consumer is protected from paying for losses on a stolen credit card under most circumstances. So, if they don’t have to worry about paying for fraudulent charges, how concerned should they be? The real test comes when the card holder is forced to work with the issuer to get an account shut down and replacement card reissued following fraudulent activity. If it’s a relatively smooth process, the consumer is satisfied. However, if it takes time for the new card to be replaced, or if the consumer has to call several different departments to get their case resolved, those unpleasant experiences can lead to lost revenue, lost interchange—and worse yet, a lost card member.
But banks and merchants aren’t giving up the fight. Instead, they are countering the visibility issue with their own media campaigns. They are blanketing stores and branches—along with prime print and TV advertising space—with reminders of recommended security precautions to remind us all of the virtues of fighting fraud together. Neither the banks, merchants nor the consumers can fight fraud alone; everyone must do their part.
Based on this information, we can surmise that the power is in the hands of the consumer—not the financial institutions or the merchants that serve them. And while that has always been the case (remember, “The customer is always right”), consumers should also do their part to be part of the solution.
Merchants and banks are hoping to capitalize on back-to-school and end-of-summer clearance sales. This busy season will be the first boon to sales prior to the holiday season. It will be incumbent upon merchants to promote the virtues of safe shopping, browsing and purchasing when using their payment credentials (plastic or otherwise) to buy their goods and services. Hopefully, their customers will do their part by implementing recommended best practices (i.e. lock your smartphone!) to help in the battle against fraud.
A complimentary copy of the Aite report can be found here.
1Based on a survey of more than 6,000 consumers in 20 countries
Michael Grillo – Director, Marketing Line Leader, Merchant Solutions at ACI Worldwide.
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