In a recent survey, 82% of executives across the globe said they believe digital wallet use will improve their company’s revenue over the next five years. The road to earning these revenues while securing customer digital IDs and accounts, however, has some tight learning curves.
The stakes for implementing a strong digital payments strategy are high for consumer-facing companies. Global usage of alternative payments is booming and fraudsters are following the money, potentially putting your customers — and your reputation — at increasing risk.
Pandemic speeds shift to ecommerce
The global transition to ecommerce was already well underway before COVID-19 hit, but the pandemic has accelerated the move to online channels. Statista reports in the first six months of 2020, global ecommerce monthly traffic grew from 16 billion to 22 billion. 1
To analyze the digital commerce and security trends facing companies during this transformative period, the Economist Intelligence Unit (EIU), sponsored by TransUnion, surveyed 1,610 executives from companies in 12 countries. All respondents were responsible for growing their firm’s digital commerce, improving customer protection or managing the customer experience (CX).
More than 60% of those surveyed said their organization changed their digital transaction processes as a result of the pandemic, but only a third of them did so without technical failures. The rest experienced either minor (27.3%) or severe (11.6%) glitches or technical failures.
Despite these initial difficulties, survey respondents are generally optimistic digital wallets can enhance revenues. This was especially true in India, Brazil, Chile, the Philippines and South Africa.
In some markets, digital wallets are increasingly integrated into “super-apps,” such as WeChat and Alipay in China, and Gojek in Indonesia. I go more in depth into super-apps in the webinar, but in short, they’re a one-stop online ecosystem for messaging, social media, marketplaces and business services.
When respondents were asked about the top risks super-apps could pose to their organization, executives identified data sharing with third parties as the second highest concern. This is especially true in regions such as the U.S. and EU where new data privacy regulations like the CCPA and GDPR have been rolled out in recent years and could complicate collecting personal data. Additionally, there’s increasing noise from legislators about the possibility of anti-monopoly interventions against large tech giants most likely to branch into the super-app space.
In cases of sharing data with third parties, regulatory limitations need not delay digital wallet innovation. Of survey respondents, 51% said such regulations can improve the customer experience. For example, these protections help customers feel safe enough to continue or expand their use of digital wallets.
Security concerns are the largest barrier to digital payment adoption
Despite being optimistic about this emerging technology, executives point to the barriers of super-apps becoming the dominant portal for digital commerce over the next five years. Forty-eight percent of respondents said the main barrier would be concerns about security, privacy or fraud. It’s reasonable to extend that barrier to digital wallets as well.
Security concerns almost certainly increased because of the pandemic-fueled surge in digital transactions and the inevitable response from fraudsters.
TransUnion’s quarterly Global Consumer Pulse Study found as of March 2021, 36% of consumers surveyed said they’d been targeted by or fallen victim to digital fraud related to COVID-19 in the last three months — up from 29% in April 2020. Phishing scams comprise the largest wave of this increase.
These attacks have exposed account credentials and personal data that fraudsters are using to launch other types of attacks. For example, TruValidate customers reported a 15% increase in account takeover (ATO) incidents over the past year.2
In contrast, reports of credit card fraud have decreased over the last year. Digital wallets and other alternative payment methods have likely contributed to that; their encrypted data and tokenized credentials are more difficult to steal, so fraudsters tend to move on to more lucrative targets.
Advances in biometrics and data analytics can ease friction while maintaining security
A critical tool in combatting ATOs and other attacks without adding undue friction to digital purchases is biometrics, including fingerprint, facial or voice recognition. Eighty-five percent of the executives surveyed expect the vast majority of digital payments over the next 10 years will use biometric authentication.
Data analytics is another technology advancing rapidly, and making digital payment fraud detection and prevention more effective. It’s a highly specialized field, but companies such as TransUnion are making improved data analytics available to businesses regardless of their existing analytics capabilities.
TruValidate™ Global Fraud Solutions deliver a comprehensive view of each consumer by linking proprietary data, personal data, device identifiers and online behaviours — in real time. This allows us to develop a more complete picture of consumer identity and make trust possible in faceless channels.
For more information
For a more complete discussion around digital wallets, super-apps, ecommerce trend research, and what your company can do to improve CX and data security, view our on-demand webinar — The Transformation and Disruption of Super-Apps and Digital Wallets.