January 4, 2016
Compiled by CardNotPresent.com Staff
Predictions are a tricky business. For instance, last January, Tim Cook boldly called 2015 “the year of Apple Pay.” While the past year spawned plenty of competition for Apple Pay, the mobile wallet space in the U.S. remains muddled. But, it’s the time of year for clean slates and several experts in the card-not-present payments and fraud industries agreed to share their expectations for 2016 with our readers.
From the true effect of EMV on card-not-present fraud, to biometric authentication, to cross-border hot spots, to rosy predictions of e-commerce growth, it’s the time of year for optimism. Hear what leaders in our space tab as trends to watch, opportunities to leverage or threats to prepare for in 2016.
There seems to have been a major push over the last few years by e-commerce merchants offering digital delivery of goods to reduce review rates as close to 0 percent as possible. I see physical goods merchants following their lead in 2016. With the increased sophistication of existing fraud solution platforms, focus on pre-transaction analysis and machine-learning based solutions, the near-zero-percent rate seems like more of a realistic option over the next year.
On a separate note, the forecasted increase in acceptance of digital-wallet-based payments over the next three years is aggressive to say the least. This year will be pivotal to hitting these rates. With the burden placed on both the merchant (on the integration and acceptance side) as well as the consumer (on the payment option selection side), the barriers seem to be high for widespread acceptance of digital wallets. Consumer education will be key and I feel the digital wallet solution that does this the best in 2016, will gain a much needed foothold that will pay dividends long term.
Jamon Whitehead, Senior Manager of Risk and Payment Operations, Backcountry.com
Reducing checkout friction and maximizing conversions are [hide for=”!logged”]two of the most important things to consider when selling online. Digital commerce and the influence of connected devices are changing the way consumers shop and pay—making it easier for them to buy online can help merchants save sales and customer relationships. Minimizing fields at checkout, offering coupons, and a localized payment experience with the right payment types can increase your chances of getting a sale, but don’t stop there. Payment processing declines can become a source of friction if merchants are not connected to multiple acquirers, process in the wrong currency or are unable to failover in the event of a decline. All of these tactics provide an ideal opportunity for merchants to capitalize on the 45 percent e-commerce growth that is expected in 2016.
Ralph Dangelmaier, CEO, BlueSnap
I predict that card-not-present fraud will only grow slightly in 2016, despite the implementation of EMV. I believe that much of the transition from card-present fraud to CNP fraud has already happened in 2015 and the “giant wave” of CNP fraud predicted by many may not happen in 2016. I also believe fraudsters will continue to target the remaining non-EMV-protected retailers aggressively, as the full roll out of EMV in the U.S. continues to be slow. Nonetheless, the overall value of fraud will continue to grow and retailers need to remain extremely vigilant toward new types of fraud attacks. Also, mobile payments usage (Apple Pay, Samsung Pay, etc.) will grow exponentially in 2016 and retailers will begin to face some operational challenges in regard to dealing with the technical nuances. For example, adjusting payment and fraud prevention processes to deal with the lack of a card number.
Chris Uriarte, Chief Strategy and Payments Officer, Vesta Corporation
An increased focus on global growth opportunities: Chinese e-commerce operations across borders is estimated to reach $1.02 trillion in 2016, and the number of China-based consumers buying U.S. brands online during the 2015 holiday season increased seven times over 2014. Indian e-commerce imports are expected to grow 78 percent—and 27 percent of Indian orders are from U.S.-based websites. These sorts of numbers are exciting—so much so that even retailers who have so far held themselves back from going global are beginning to move in that direction. Retailers must leverage cutting-edge behavioral analytics and human expertise to make sure fraud prevention can help drive international sales. From a fraud-prevention perspective, the main thing to remember is to adapt. Effective fraud prevention is based on a good understanding of your customers—both genuine and fraudulent. But, as any department will tell you, customer expectations, priorities and norms vary from country to country. They have different payment preferences, go for different merchandise, complain about different things. That has crucial consequences for fraud prevention, and if you don’t take that into account when you enter new markets you’re going to let bad customers through and reject good ones. To work internationally, fraud prevention must be sensitive to local differences.
Bill Zielke, Chief Marketing Officer, Forter
2016 should focus on the authorization gap (96 percent authorization in retail POS while e-commerce is less than 80 percent). Merchants, banks and service providers all think that closing this authorization acceptance gap is the most important thing. While the payments industry focuses on fraud (which is important), one of the unintended consequences of reducing fraud is decreasing authorization rates by declining “good” orders that don’t pass fraud screening. We need to be able to use technology in an intelligent way to know “when to say when.” The real question for 2016, is: how do I make sure the BEST customers can buy online friction-free?
Michael A. Keresman III, Founder, CEO & President, CardinalCommerce Corporation
“What we’ll see in 2016 more than anything else is an even greater push for authentication measures that rely on passive behavioral biometrics to identify good users and stop fraud. This will be a response to two trends that are coming to a head. First, something as simple as a password or as complicated as KBAs and 2FA doesn’t work and just makes good users lives more difficult. Second, the move to mobile driven by user demand offers security experts more non-PII biometric information than ever before. Passive behavioral biometrics are the best, most secure option for traditional web but are even better in the mobile space. Businesses will be better able to predict risk, and customers will have a fast, uninterrupted user experience whether on their desktop computer or their mobile phone.”
Robert Capps, Vice President of Business Development, NuData Security
Say goodbye to the U.S./Canadian border (for fraud): Regardless of channel, merchants will be confronted by fraud that won’t be stopped or slowed by the international boundary. As traditional card counterfeiting becomes unrewardingly difficult in the post-EMV U.S. market, fraudsters armed with compromised or stolen Canadian cards will be faced with the same challenges regardless of their latitude on a map. Instead, these groups will shift their focus to card application fraud and account takeovers to get a hold of EMV cards that they control and which will then be useful on either side of the border. This fact, along with data breaches and e-commerce account takeovers, will fuel the growth of CNP fraud, and a (mostly) shared language will make cross-border CNP fraud a common occurrence. As the world becomes more connected and the way we pay grows more uniform then fraud will do more than shift targets, it will erase borders.
Al Pascual, Director of Fraud and Security, Javelin Strategy & Research
2016 will be the tipping point where advances in security, maturity and user experience will lead to the mass adoption of biometric authentication in the mobile channel. We predict that biometrics will be used for nearly 50 percent of mobile transactions including banking, shopping and enrollment in 2016. Advances in computer vision will make smart phones better than the human eye when it comes to spotting authentic identity documents. As a result, online and mobile technology will become as good, if not better, than humans at verifying a user’s identity, bringing fraud losses down 15 percent in the mobile channel next year. This will help reduce what some experts estimate to be $2 billion lost from new account fraud. Also, in 2016, improvements in mobile technologies and data analytics used to verify customer IDs in the mobile channel will enable companies to double the amount of approved customers through the mobile channel by decreasing their pending queue. This will result in a 50 percent increase of real applicants being approved for accounts.
James B. DeBello, President and CEO, Mitek
Main street moves online: Consumers have long clung to the outdated idea that while big-box retail brands have a robust e-commerce store to match, independent retailers are more of the Internet-averse “mom and pop shop” variety and lack an online presence. But in fact, a recent survey found 61 percent of independent retailers plan to increase their e-commerce budget in 2016, and 39 percent predict more online sales will be the biggest revenue driver. This year, independent retailers will shed any outdated notions and prove to consumers they’re as tech-forward as their big-box competitors.
Dax Dasilva, CEO, Lightspeed POS
Card-not-present sales will continue along a double-digit growth trajectory. CNP has historically been an area of the economy that doesn’t slow even when physical retail sales stall. Mobile will continue to gain prominence in the CNP arena. The growth pattern will continue to follow prior year trends. Bad-debt losses will increase over previous years due to the U.S. implementation of chip technology. EMV will drive liability-shift losses from the retail stores to Internet merchants. Merchants will need to be diligent in their fraud-fighting efforts and look for additional solutions. Manual review queues will continue to be used, but greater attention must be given to reducing held rates by adopting sophisticated tools and techniques such as behavioral modeling and user authentication. Digital wallets like Apple Pay, Android Pay, MasterPass, Visa Checkout and Samsung Pay will remain flat. Early adopters have already aligned themselves with their wallet of choice. There is little demand being driven by U.S. merchants to accept these forms of tender and no groundswell of support from consumers. Alipay and Alibaba will gain momentum in the U.S. market while continuing to expand their global influence.
Tim Laudenbach, Vice President, eBureau
In 2016, we’ll see power continue to erode from traditional structures as data is democratized. Predictive analytics will penetrate billing systems in early movers, giving larger enterprises that have adopted those tactics a distinct advantage. We’ll also see a new data protection model evolve as corporate leadership learns the drawbacks of traditional perimeter firewall-based security.
Adam Altman, Founder, Rebilly
Digital and mobile applications and enrollments are continuously on the rise. In 2016, we’ll see an increase in consumer demand for seamless online experiences while businesses face the challenge of both providing convenience for customers and maintaining best practices from a security perspective and working to mitigate against fraud risk. In 2016, the intersection of convenience and security will come to a head and businesses will be looking for ways to keep pace with customer demands for ease and convenience while working to keep their data and information secure.
Aaron Kline, Vice President of Innovation and New Ventures, ID Analytics
Second-factor authentication gains greater traction. While 2FA (the process of adding a second layer of protection such as SMS or a PIN to your basic login) is not new, it’s becoming more commonplace and being adopted by larger businesses to increase security among both their employees and customers. Many establishments realize relying on username and password alone isn’t enough. Last fall, one major Wall Street bank’s data breach served as a reminder that large-scale data breaches can be caused by cyber criminals taking advantage of systems that don’t have an extra means of authentication in place. In this instance, the problem was sourced to the exploitation of login credentials that were used to gain access to the wider system. Most recently, Amazon has added the option of 2FA to its sign-in process, becoming one of the first major retailers to offer this service to customers. Whether it’s passcodes, biometrics, ID verification scanning, or facial recognition, businesses have a number of options that can be added that greatly improve security with modest impact on the consumer experience.
Marc Barach, Chief Marketing Officer, Jumio
Online transactions will continue to rise. So will fraudulent attempts. Online retail is estimated to be valued at £185.44 billion ($273.33 billion) in the U.K. alone in 2016. It’s convenient but customers expect security. However, the simple fact means with more money flowing online, the Internet becomes more attractive to fraudsters. The U.S. liability shift deadline for adopting EMV was in October 2015 but many U.S. retailers and consumers are still to fully adopt the technology. This means the imminent rush of fraudsters from card-present transactions to card-not-present transactions is still to materialize. This will come and fraudsters will hit European merchants and customers hard as they chase the rewards of online payments.
Roberto Valerio, CEO, Risk Ident[/hide]