We live in a digital world of data breaches and fraud, creating a challenging environment for merchants and shoppers. Bad actors constantly look for new and creative ways to access and compromise sensitive payment data, prompting a need for businesses and consumers to be vigilant.
Our Fall 2024 Carat Insights report looks at cybersecurity and fraud, offering strategies for merchants to help ease security concerns. The report was created by surveying 1,000 U.S. consumers and conducting interviews with a dozen CISOs from national organizations to offer actionable insights for enhancing customer protection.
In the digital marketplace, building trust takes center stage
Convenience is now the name of the game. Our mobile phones are rarely out of reach, and we're accustomed to making purchases online whenever and wherever we want. In the past, customers had to shop at a store to find the latest deals on clothing, shoes, and household items. What used to take a few hours — driving to a store, browsing the aisles, and paying for purchases — only takes a few minutes to do online.
Nevertheless, the continuous effort to balance convenience and security poses a significant challenge. While 55% of shoppers say they make at least half of their overall purchases online, three in four put more trust in purchasing at the store rather than online. What’s more, people use credit cards (32%), digital wallets (27%), and debit cards (20%) when making online purchases – three payment methods that are considered the least secure according to consumers.
Incorporating advanced security measures and signifying payment security on their websites are among some of the best practices businesses can implement to help increase trust among consumers.
Understanding security vulnerabilities and fraud risks
In today’s digital marketplace, where most online activities require an account, consumers are increasingly worried about account takeover. While 80% of those surveyed recognize account takeover as a top fraud risk, 48% share usernames and passwords with others when it comes to subscription services, significantly increasing risk.
Although account takeover is a primary concern, it is not the only worry when it comes to fraud. Consumers recognize that hackers are creative and use various methods to discover vulnerabilities of the digital ecosystem. Phishing (53%), social engineering (44%), payment fraud (37%), and password attacks (35%) were listed among the top five fraud-related threats.
Moreover, consumers, whether intentionally or not, are engaging in first-party fraud. Approximately two-thirds of consumers have disputed a transaction for an online order without returning the item or asked for a refund on a subscription they forgot they had in the first place.
Taking charge: A proactive approach to security control
Consumers recognize they are responsible for their actions. In 2021, 31% of those surveyed by Carat Insights said that breaches were caused by human error. In 2024, 64% felt that way, a whopping 106% increase.
The good news is that there are several ways that everyone can protect themselves, including introducing multi-factor authentication (MFA), changing and strengthening passwords, and using password managers. Everyone should take the necessary steps to learn how to protect their information.
It’s easy to see why 87% of respondents said that MFA increases confidence in security. MFA adds another level of protection by having the account owner provide at least two verification forms to access their account or confirm a transaction. Combining a password with a verification text or email makes accessing an account harder for bad actors.
Businesses should also use MFA to validate transactions, but some believe that might frustrate users. This can be addressed by increasing authentication rules for potentially high-risk activity, such as making a costly purchase.
As one cybersecurity executive in the survey commented, "The convenience we want must be supported by the security we need.
Both businesses and consumers should take steps to safeguard their information and contribute to creating a safer ecosystem. Education and training are key in understanding security threats and learning how to mitigate the risk. In addition, by leveraging tools like encryption and tokenization, real-time transaction monitoring and introducing step up authentication for high-risk activities, businesses can further safeguard and customer information as well as their own.
How AI is shaping the fraud and security space
Consumers are becoming more aware of AI's benefits and potential threats in cybersecurity. Significantly, only 5% disagree with the statement, “The recent developments in AI have increased my worry around cyberattacks.” Shoppers were asked if AI developments increased their cyberattack concerns; 36% strongly agreed, and 40% agreed.
While consumers are wary of the risks AI may present to them, merchants are leveraging AI to help mitigate those risks – leveraging artificial intelligence tools to strengthen fraud detection, prevention, and anomaly detection.
A watchful eye is required when examining the hype and reality of AI. Remember when people were afraid of storing data in the cloud? Time and experience have changed that perception.
One strategy for merchants to ease a consumer’s AI concerns is to communicate how safeguards can work, such as explaining how phishing scams work. This helps position merchants as valuable resources looking out for consumers.
Collaboration is king
Merchants and consumers must work together to protect sensitive payment data. For consumers, it’s as simple as utilizing MFA, regularly updating passwords, and using password managers to help prevent many cyber threats. For merchants, it’s educating shoppers about how they can protect themselves. Bad guys aren’t going to stop their nefarious ways. But if consumers and merchants stay vigilant, criminals will have a harder time succeeding.
About Carat Insights
The Fall 2024 Carat Insights report looks at cybersecurity and fraud, offering strategies for merchants to ease security concerns. The report was created by surveying 1,000 U.S. consumers and conducting interviews with a dozen CISOs from national organizations to offer actionable insights for enhancing customer protection. For more information, download the full report.
As a global leader in payments and financial technology, Fiserv helps clients achieve best-in-class results through a commitment to excellence and innovation. Carat from Fiserv is the global commerce platform orchestrating payments and experiences for large enterprise clients. Learn more at carat.fiserv.com.
