The Digital Commerce Tsunami And Ongoing Payment Ripple Effects

In A Decade of Digital Transformation in 12 Months, 46 C-suite executives spoke with PYMNTS for its Q2 eBook on what the world will look like as recovery rolls on and the next iteration of normal rolls out. In this excerpt, Simon Law, CEO of LoginID, discusses how the massive digital shift, with its focus on speed and convenience, has brought with it added concerns about protecting user data.

Read the entire eBook here.

The past 12 months have seen a massive shift toward digital payments. From eCommerce to banking, customers have gotten used to the ease with which they can make purchases and perform transactions right from their devices. This new norm has forced merchants to adapt – or risk becoming obsolete. As global restrictions ease and businesses slowly start to open up, customers will be expected to return to in-person shopping; however, businesses will still need to consider the large number of customers now accustomed to doing everything online, perhaps only visiting a physical location for essential transactions or for curbside pickups. Consumer behavior has altered from the pre-pandemic stage, with customers now opting for convenience. In some cases, this translates to preferring to continue making “remote” transactions.

The focus on making goods and services available digitally – while catering to a customer’s desire for convenience – brings with it the concern of protecting user data. Numerous studies have reported an increase in fraud during the pandemic as more users took to working from home and banking and shopping online.

Credit card fraud, phishing, SIM swap attacks and identity fraud have all been on the rise as businesses have scrambled to keep up with changing consumer behavior. A majority of fraud cases were attributed to weak or stolen passwords. For example, there were a large number of phishing cases reported where outof-work people were scammed by fraudsters posing as government officials offering them relief payments.

Since a majority of fraud cases have financial implications, the answer to the fraud problem lies in authenticating payments, which creates optimal trust between consumers and merchants by giving both parties a high level of certainty around each transaction. For businesses, having a combination of certainty around a customer’s identity and strong authentication gives them assurance that the customer is who they say they are and intends to perform the transaction they performed, leading to a lower fraud transaction rate. This merging of identity and authentication is foundational to the notion of authenticated payments: Without either component, merchants cannot be certain about the authenticity of payment.

At this stage, businesses might be thinking: What about the user experience? Won’t adding additional or new layers of security affect the user experience? Not necessarily — another benefit of authenticated payments lies in the user experience. By implementing strong authentication such as FIDO (short for Fast Identity Online), businesses can incorporate a frictionless login, registration and transaction confirmation, and an authentication experience. As FIDO continues its path as the de-facto standard in strong authentication and becomes more widespread and embedded into more websites and apps, consumer sales conversions will increase due to the simplicity and convenience of performing everyday transactions.

What we can surmise is that authenticated payments has become the emerging way to conduct remote commerce. And it fits perfectly with the new expectations around buying behavior, satisfying both businesses and consumers with its ease of implementation, its robust security and its regulatory friendliness. With more merchants and banks turning toward authenticated payments or transactions, it’s only a matter of time before we start seeing authenticated payments used in every industry, be it banking, eCommerce, FinTech or healthcare.