By Donald Kasdon, founder at T1 Payments
The COVID-19 pandemic completely transformed e-commerce in 2020. Not only did we see record e-commerce adoption, but fraud also become a bigger issue than in years past as cyber criminals exploited the high volume of online shoppers. With the holiday season behind us, and as we move into a new year, I took the opportunity to reflect on the past 12 months while looking toward the future of the payments industry.
Supporting this reflection, T1 Payments surveyed over 100 payments professionals between November and December to uncover how COVID-19 and holiday season would influence payments trends and technology investments in 2021 and beyond. Here are the three biggest trends we discovered.
Payments Leaders Will Invest in Tech for Fraud and Chargeback Prevention
The high-risk industry is particularly vulnerable to chargebacks and online businesses operating in this space are far more likely to experience a higher rate of payment disputes than other e-commerce sellers. Chargebacks happen when a customer reports a problem with a transaction to his or her card issuer and requests a refund. Without a strong defense, it’s easy for a high-risk merchant to go out of business.
High-risk merchants can help shield their online business from legitimate chargebacks with good communication. This can include (but is not limited to) accurately describing products, clearly explaining the refund policy, detailing recurring charges and abiding by promised shipping times. There are also payment processors, like T1 Payments, that offer robust chargeback protection services.
Credit Card Testing Becomes a Larger Issue
As a result of the increasing rates of online shopping, fraudsters and hackers are taking advantage by stealing financial data from both consumers and merchants. Credit card testing is one area of fraud seeing massive spikes. This method is used by fraudsters to obtain, steal, or purchase stolen credit card data and test them on unsuspecting merchants’ e-commerce websites by placing multiple small orders all at once. This allows the scammer to verify which cards are active, have available credit, and have not been reported, which leads to high-cost orders down the line.
There are several tactics that merchants can employ to proactively prevent fraud like credit card testing. For instance, vendors should invest in an IP blocking and banning tool to lock in on specific sources of fraud and prevent them from accessing their payment gateway in the future. Also, many incidents of e-commerce fraud can be prevented on the backend by verifying your customers’ identity. This can be done by requiring logins for all purchases, preventing a scammer or bot from making several transactions with different cards.
Social Commerce and Digital Payments Will Boom
With the COVID-19 pandemic forcing brick-and-mortar stores to close their doors, social commerce can be a tool for retailers to make up for lost sales during lockdown. And with social commerce expected to grow significantly in 2021, merchants would be smart to adopt the latest best practices.
One way to improve social commerce customer experiences is through communicating delivery expectations. This includes transparent communication as to the expected timeframe for receiving the goods or in some cases when there may be a delay. Not only does this improve customer experiences, but also leads to fewer cancelled orders, which minimizes chargebacks and refunds. Localized checkout is another smart tactic for merchants venturing into social commerce. By allowing customers to pay for products in their native currency, this leads to higher conversion rates and a frictionless checkout experience for customers.
As we move into the new year and e-commerce continues to grow, we only expect fraud cases (including credit card testing) to grow. While these present challenges for e-commerce merchants, there are also several new opportunities to provide customers with unique and engaging experiences, like digital payments or social commerce. However, to be successful on all fronts, merchants need to have a plan and follow the latest best practices.
At T1 Payments, we’re up to date on the latest trends in payments. For more information on how we can help, visit our website.