But is it Safe?

by Tina Manzer

Get ready. Millennials (one-quarter of the U.S. population) are leading a charge toward mobile wallets. The security of their transactions is up to you.

You’ve seen it yourself. Consumers increasingly rely on online and mobile technology to make purchases. That’s good – the practice opens up more opportunities for stores like yours to serve more customers and grow revenue. In fact, according to the results of the 2017 American Express Digital Payments Survey released this summer, 81 percent of retailers who have both ecommerce and brick-and-mortar stores say that online and mobile sales offer the biggest growth opportunities for their business. But – also increasingly – shoppers worry about how secure their information is in the digital world. Their fear, at times, prevents them from purchasing.

Their concern is well-founded, notes RetailDIVE, an online retail news site. It reports that U.S. companies and government agencies experienced a record 1,093 data breaches in 2016, up 40 percent year over year. All evidence suggests there will be more than that in 2017, when all is said and done.

Nearly one in three retailers has already suffered revenue losses as a result of a cyber attack, reports RetailDIVE, and pointed to Cisco’s 2017 Annual Cybersecurity Report, which states that stores perceive targeted attacks as the greatest risk facing their business. “Even so, just 52 percent of retail organizations consider their security infrastructure up-to-date and upgraded with the best technology tools (below other industries at 59 percent), and only 61 percent strongly agree that they are able to maintain full compliance with payment card industry (PCI) security standards,” says RetailDIVE.

Contactless payment technology can be traced back to 2004, when Near Field Communication technology enabled information to be digitally transmitted over short distances using radio waves. But it wasn’t until the 12-month period between October 2014 and September 2015 that the landscape of mobile wallets was transformed, thanks to Apple Pay and Samsung Pay. “As a result, mobile wallet awareness jumped from 55 percent to 81 percent in just one year,” according to a study released this year by Synchrony Financial.

“But while awareness has grown, adoption of the technology still lags.”

According to the AMEX survey results, more than 70 percent of online shoppers have used digital-payment services like mobile wallets, one-click checkout buttons and P2P payment apps. Forty-one percent said they always or sometimes use those solutions when they pay.

But with smartphone ownership at 82 percent and growing, only 9 percent of the U.S. population says they plan to use a mobile wallet regularly, says Synchrony Financial. The benefits – like convenience and speed – seem to be outweighed by the barriers – shoppers feel that they don’t need it, they’re happy using traditional credit cards, and they’re just not sure it’s safe.

The AMEX survey reveals that 37 percent of consumers – those who have made three or more online purchases in the last year – have also abandoned an online purchase because they didn’t feel their payment was secure. What’s more, 73 percent of merchants said their level of fraudulent online sales has increased or remained the same over the past year.

“Digital innovation enables consumers to buy from merchants when and where it’s most convenient for them,” says American Express VP Mike Matan. “But the results of our survey show that for merchants to capitalize on consumers’ continued shift to online and mobile commerce, they need to provide their customers with the confidence that their information is secure.”

In the past year, merchants spent 31 percent of their IT budgets on payment security, revealed the survey.

They’ve also taken other steps.
• requiring customers to enter the CVV code found on the back of their credit cards. (It’s so simple.)
• using technology to confirm that customers are not robots or do not utilize data encryption for their online channels,
• declining transactions when a verified billing address is not provided,
• requiring customers to set up an account before making a purchase online, and
• increasing their budget for payment security.

Investments in online security yield tangible benefits, according to the AMEX survey. Among the 71 percent of merchants who experienced an increase in online and mobile sales over the last year, more than half said that enhanced security features have had a very significant impact on their sales. But it’s not the only factor contributing to the growth of mobile sales. Nearly 80 percent of consumers – those who specifically indicated they were more likely to purchase an item in-store – said that a free delivery offer could change their mind. Ditto for online-exclusive discounts on purchases, said 75 percent, and the chance to earn exclusive rewards for online purchases, said 50 percent.

More and more merchants and consumers are turning away from cash. One in five consumers told AMEX that they didn’t have cash in their wallet at the time of the survey. Nearly half said they rarely or never use cash for making purchases. This has not gone unnoticed by retailers. Among those who currently offer cash/check payment options to their customers, two-thirds say they are very or somewhat likely to go completely cashless.

“For a generation that has grown up with digital technology and views digital purchasing as the norm, the mobile wallet is a natural evolution,” says Synchrony Financial. “As a result of improved value propositions, the use and acceptance of mobile wallet is likely to grow in the coming years. Retailers who have not yet embraced mobile payment technologies should consider them as they develop POS strategies going forward.

In 2016, Synchrony Financial introduced a fully-integrated plug-in credit feature for the mobile apps of leading retail partners. The Synchrony plug-in (SyPi) allows retailers’ credit cardholders to shop, redeem rewards, and manage and make payments to their accounts via their smartphone.

The 2017 American Express Digital Payments Survey findings are based on responses from 1,020 U.S. consumers, and 401 U.S. merchants who offer online/mobile payment options to their customers.

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