More than half (54%) of US online small to medium-sized businesses worry that the move to frictionless payments, such as transactions that take place behind the scenes in apps, is leaving them more open to fraud and will negatively impact revenues according to a new report from Paysafe. This concern is heightened by the fact that 76% feel they are being more aggressively targeted by fraudsters now compared to a year ago and 54% consider card fraud an increasing challenge.
These concerns mean US SMBs now view security as the most important factor when considering their eCommerce setup. Security (59%) ranks above reliability (45%), cost (49%) and ease of transactions including refunds (45%). US SMBs are also wary that these concerns may hamper the buyer journey for consumers. Four in five (80%) believe that longer verification processes during the payment stage – which could potentially combat these issues – runs the risk of losing consumers. Yet, 75% – a global high – admit they don’t know how to balance security with an acceptable customer experience, a global high amongst respondents, highlighting the trade-off faced by US online merchants.
Buying into a fragmented payments landscape
Leading global payments provider Paysafe’s latest research report, entitled Lost in Transaction: The Future of Payments for SMBs, is an international research report investigating the attitudes of small and medium online businesses in the US, Canada, UK, Germany and Austria to the evolution of payment types. It also incorporates further insights from offline, brick-and-mortar merchants in the US and Canada.
Abandoned transactions are also posing a problem for US merchants, with 10% of purchases not being completed. Yet, while 22% believe this reflects successful fraud checks, 32% say abandoned transactions have a major impact on business performance. Notably, 16% of US merchants believe purchases are abandoned purely because of a lack of payment options at the checkout phase.
When it comes to which payment options to offer, over four in five US merchants (82%) believe offering multiple choices is essential, while 82% plan to introduce new payment methods in the next two years. Credit cards (offered by 89% of US online merchants) remain relatively ubiquitous, while 52% of merchants – a global high – currently accept digital wallets, with a further 15% looking to adopt them over the next 24 months. Meanwhile, 79% believe accepting prepaid cards gives access to new customers, and 44% say they will offer online cash replacements in response to consumer demand, and to service the unbanked, in the next two years. One method with the greatest anticipated gains is mobile apps, with 45% planning to offer them in the next two years, up from 17% currently.
More innovative forms of payment
But merchants are also taking notice of macro consumer trends. 73% agree that consumers want more innovative ways to get short-term credit, as evidenced by the recent rise of ‘Pay Later’ style products which give consumers more flexibility. They also appear to be conscious of ‘proactive innovation’ – a surprising 40% of US SMBs in physical retail premises say they will be capable of delivering Amazon Go-style checkout-free stores in the next two years, to improve customer experience and reduce friction.
Todd Linden, CEO, Payment Processing North America, Paysafe Group, commented:
“US online SMBs want to be able to punch above their weight with their eCommerce footprint, but like many merchants internationally are struggling to find the right blend of security and making the consumer’s payment journey as simple as possible. US merchants are telling us that frictionless payments are becoming more important to their consumers, and therefore they plan to adopt many new payment types in the coming years. However, many have expressed equal concern in how this may expose them to greater fraud. Delivering new ways to pay is now a business imperative. This may go some way to explaining the rise of prepaid cards, online vouchers and cash replacement systems, which can alleviate these issues for both consumers and merchants.”
US contactless boom
In the US, offline merchants are also pushing to accept contactless transactions – an area where the US currently lags behind compared to global counterparts. Sixty two percent expect to offer it over the next couple of years (compared to 37% at present). These findings may be symptomatic of a fragmenting payments landscape, with 30% of US merchants reporting a decrease in cash payments in the past year. Research undertaken earlier this year showed 54% of UK consumers recently made a contactless payment, compared to just 3% in the US. But US merchants’ desire to enhance transaction efficiencies (74%) and speed up in-store payments (58%) and could finally symbolize a step change in contactless in the US market.
Readiness for invisible payments
US brick-and-mortar businesses also expect to widen their payments portfolio to appeal to consumers. Fifty-five percent believe they will have apps to allow customers to pay for goods automatically and similarly, 64% expect to have smartphone driven systems. 40% even expect to have fully frictionless, Amazon-Go style systems – a clear departure from the largely card-based delivery still widespread currently.
Necessary decision to better their businesses
“It is clear from these findings that US merchants are planning changes to their payments setup in the coming years, with signs that contactless payments may finally be ready to take off in the US. All of the changes merchants expect are being driven by a need to balance security, flexibility, frictionless payments, efficiency and speed. US businesses are clearly ambitious, as evidenced in the finding that two in five expect to be able to offer a checkout-free experience for their shoppers in the next two years,” added Linden.
About Lost in Transaction: The future of payments for SMBs research
Over 2017 and 2018, Paysafe has published a number of independent research reports in the Lost In Transaction series. This new volume – supported by London-based agency Loudhouse in Q3 2018 – looks at the evolution in demand from merchants in the small business sector for payment types.
The merchants surveyed for the report form two groups. We surveyed businesses that accept card not present transactions (online merchants) and ones that accept card present transactions (offline, bricks-and-mortar merchants).
The card not present merchants comprised 601 companies from the US, Canada, UK, Germany and Austria, employing between 1-50 employees and making $60,000–$10m in sales. The card present data comes exclusively from 306 US and Canadian businesses with the same revenues and levels of employees.
About Paysafe Group
Paysafe Group (Paysafe) is a leading global provider of end-to-end payment solutions. Its core purpose is to enable businesses and consumers to connect and transact seamlessly through industry-leading capabilities in payment processing, digital wallet, card issuing and online cash solutions.
With over 20 years of online payment experience, an annualized transactional volume of over US $80 billion, and approximately 3,000 employees located in 12+ global locations, Paysafe connects businesses and consumers across 200 payment types in over 40 currencies around the world.
Delivered through an integrated platform, Paysafe solutions are geared toward mobile-initiated transactions, real-time analytics and the convergence between brick-and-mortar and online payments.
Visit us at www.paysafe.com.