In the wake of the global pandemic, businesses and consumers worldwide have flocked to embrace the digital way of life. According to Euromonitor International, global eCommerce is surging with more businesses relying heavily on digital channels to reach their customers. In Asia Pacific, businesses recorded 37.6% growth in online orders in 2020, and this is expected to nearly double to reach USD2 trillion by 2025.
Payment fraud grows in tandem with eCommerce in Southeast Asia
Yet, with opportunity comes risks. While the accelerated growth of eCommerce provides benefits such as higher transaction volume to online merchants, it has also led to worrying fraud statistics. Studies have shown that globally, 27% of online sales end up being fraudulent, and more than one in three consumers have recently been targeted by digital fraud. Closer to home, the rate of attempted fraud in Southeast Asia is up to 12 times greater than the global average, and online merchants lose an average of 1.6% of revenue to direct fraud each year.
We discuss why Southeast Asian fintechs need to invest in cybersecurity from the start
At the same time, mobile-first Southeast Asia has seen traffic for online shopping increase by leaps and bounds in the past year, with Singapore leading the trend with a surge of 35% compared to 2019, followed by the Philippines (21%), Vietnam (19%), Malaysia (17%), Thailand (15%) and Indonesia (6%). A forecast by eMarketer projects a 14.3% growth again this year. With Southeast Asia leading in mobile penetration rates, fraudsters are increasingly targeting mobile app users. This calls for mobile-first digital fraud protection solutions to be prioritised in the fight against online fraud attacks.
A review of consumer sentiments towards online payments
In the inaugural Vesta Online Payment Sentiments Survey, we took a timely pulse-check on more than 4,300 respondents across Singapore, Indonesia and the Philippines about consumer needs and concerns that would be of interest to merchants already in the online marketplace, or looking to jump on the digital bandwagon.
- A safe, secure and smooth online shopping experience is key
Vesta’s survey revealed that safety and security remain a top concern among online shoppers, and there is an unspoken expectation of merchants to put in place the right solutions. However, shoppers also see the hassle of multiple verification and authentication steps in checkout as a top payment problem. One in three (33%) respondents cited multiple verification and authentication during checkout as a ‘payment problem’ they faced in the last 12 months. Across all payment methods, multiple verification and authentication is a top payment problem faced by one in three (33%) of respondents; followed by declined payments without valid reasons, experienced by one in five (22%) online shoppers surveyed.
- Negative payment experiences erode potential revenue
Payment friction can frustrate customers who already buy from multiple brands and will not hesitate to shop at another site that oﬀers a smoother online shopping experience. According to Vesta’s survey, almost half (47%) of all respondents have encountered payment problems in the last 12 months, with six in 10 (57%) online shoppers in the three countries opting to stop shopping at the eCommerce site should they encounter a problem when making a purchase. More than half (54%) of those who have faced a payment problem when making an online purchase would also warn their family and friends about the merchant or eCommerce site, resulting in further potential losses in revenue for the merchant.
- Customer reviews: the swing factor
With an increasingly tech-savvy global community where people look for security in positive reviews, approximately seven in ten (69%) online shoppers rely on past reviews from previous buyers to determine if a site is secure to purchase from, according to Vesta’s survey. This underscores the impact that a negative payment experience can cause on the merchant’s business in a competitive eCommerce industry.
Online merchants can have their cake and eat it too
We get the big picture – digital payments and the threat of fraud are here to stay. What can be done to smoothen the journey forward?
Merchants are often forced to choose between protecting themselves against fraudulent transactions – which often leads to legitimate transactions being rejected – and balancing increasing their approval rates. This does not have to be the case if the right solutions are employed.
The spectrum of fraud techniques constantly grows in sophistication, evolving in tandem with technological advancements, emerging new payment methods, as well as the uptick in mCommerce and e-wallet adoption. It is therefore important for online merchants to keep abreast of shoppers’ concerns towards online payments and how to address them.
With this said, it can be challenging and inefficient to rely on manual review and static, simple fraud management solutions.
Tapping on modern, advanced fraud solutions to balance fraud prevention and ensure a smooth payment experience helps increase revenue and reduce operational inefficiencies.
Modern fraud solutions that leverage machine learning and trillions of data are capable of utilising customer behavioural data, transaction history, biometric information, and more to help eliminate false positives and improve the accuracy of fraud detection.
By enabling fraud prevention solutions to accurately determine the legitimacy of a transaction without causing any unnecessary friction during the checkout process, false declines can be significantly reduced, resulting in a smoother customer journey and quicker checkout experience. Online merchants do not need to hire a specialised team that manually reviews potential fraud cases and – in some instances – approve transactions, resulting in huge amounts of operational inefficiencies, indirectly leading to revenue losses.
TL;DR pivot online, but have a dynamic and sophisticated fraud solution strategy
Businesses which have pivoted online quickly but do not have a line of defense in place often find themselves vulnerable to new risks including digital fraud attempts. Employing advanced and sophisticated technology ensures a smooth online checkout experience for customers while improving bottom lines for businesses. With the year-end eCommerce season in full swing just around the corner, the time is nigh to have that cake and eat it too.
This article was contributed by Shabab Muhaddes, Vesta, General Manager, Asia Pacific
An accomplished professional with international experience in the payment and banking industry, Shabab has over 15 years of extensive knowledge of payments (10 years in Asia) at both Visa and MasterCard, across multiple functions and senior leadership positions in Sales, Product and General Management. Before payments, Shabab spent six years in the wealth management industry in New York and consulted for the UN Department of Economic and Social Affairs in New York.
He moved to Singapore from the United States of America in 2010 and has been living in Singapore for the past 10 years. He was recently appointed as the General Manager of Vesta, a global leader in digital fraud prevention and approval enhancement solutions, overseeing their geographic expansion across Asia Pacific. Prior to Vesta, Shabab was the Head of Digital partnership for Visa in Asia Pacific, focusing on building and executing long-term partnerships with large local and regional tech players in the region.