Security vs. convenience: The balancing act of providing payment security and delivering a smooth checkout experience

The payments process has become a critical part of a smooth checkout experience as the world turns more digital. But while convenience is probably top of mind for consumers, it is not the sole thing they want. They also want the flexibility to pay in a way that suits them along with greater security, leading to peace of mind, shows a new report by American Express.

Merchants may face a range of challenges, though, trying to match consumers’ priorities around flexibility with better security.

On the bright side, when it comes to payment security, consumers are comfortable with ensuring that the right protection measures are in place when making payments, which means they don’t worry about identity verification taking longer or involving more steps. 72% of consumers are willing to answer questions when asked for more information to verify their identity. And 79% see eye to eye on the idea that using multiple methods like passwords and PINs for payment authentication protect them from fraud.

However, if merchants create too much friction through security procedures, they may risk losing the sale. “The key to striking the right balance is to use data to better understand customer behavior, how a certain customer interacts with a business and integrate selective frictions only,” said Matthew Robinson, EVP of network and acquirer solutions at American Express.

Source: American Express

Among other challenges, fraud continues to be a significant and persistent issue facing merchants and consumers, as fraudsters’ schemes become more sophisticated. 88% of merchants and 55% of consumers reported experiencing fraud in the past year. 

While fraud can’t be wiped off the map, it can be controlled. With these statistics in mind, many merchants use more than one fraud prevention method for securing online customer transactions – via web or mobile. However, lesser-used authentication methods such as biometrics on customer devices (30% in 2022) and card-on-file tokenization (28% in 2022) are still susceptible to fraudsters, according to the report.

Cart abandonment has become commonplace

Merchants are trying to come to grips with cart abandonment that costs businesses hundreds of billions of dollars each year. However, like fraud, it is inevitable with online shopping. The most inherent problem with cart abandonment is that merchants miss out on a sale and lose a customer as well. Typically an average merchant loses over 27% of sales due to cart abandonment. 

Source: American Express

While consumers provide a variety of reasons for dropping out of transactions, time-intensive security measures are not one of them. The highest number of customers (80%) relinquish the process before completing the purchase when they are directed to unrecognized third-party sites for payment, followed by 68% citing an expired card as the reason they discontinue. 47% change their mind when they are routed to recognized third-party sites for payment.

Cart abandonment effects extend beyond the loss of revenue and impact customers’ current and future buying decisions. Checkout design is now a key point and why merchants who integrate payments into their platforms or apps are driving smoother checkout experiences. By streamlining operations for merchants and improving the experience for customers, integrated payments can act as a middle course for both consumers and merchants. 

Through integrated payments, customers can make purchases directly through the company's website or mobile app, without cruising to a separate external payment portal. Additionally, integrated payments allow customers to pay with a range of payment options, including credit and debit cards and digital wallets, which can result in less cart abandonment.

The rise of tokenization

When it comes to finding the key to an expired card, many businesses are turning to tokenization, according to Robinson. Tokens replace a card member’s account number with a secure substitute number making the checkout process less painful and allowing payments to go through even when a consumer gets a new card number – reducing the risk of losing access to a favorite streaming service, e-commerce platform or abandoning a cart.

As network tokens are managed by card networks, any update to the associated card doesn't require a new token. For example, if a card expires or a shopper loses the card and then re-issues it, the same token is still fit to use for transactions.

Card networks like Visa, Mastercard, and American Express offer network tokenization services enabling merchants to store a token instead of a card number for their customers. 

Driven by tokenization technology, virtual cards are also seen gaining traction across the payments landscape. Recently, Mastercard shared with Tearsheet how focused the card network is on implementing strategies to support and accelerate the adoption of virtual cards across new use cases and industries.

Since the beginning of the year, American Express also supports virtual cards through Google Pay, which is available on Chrome and Android. Eligible Amex card members can save their card to their Google Autofill when using Android mobile devices or in Android apps. They will then have the option to create a virtual card number for online transactions. The virtual card number provides increased security through the tokenization process by withholding the customer’s real card number from merchants on checkout. In the case a merchant suffers a data breach, the virtual card number can be replaced instead of doing away with the customer’s actual physical card. 

“This means shopping online with a virtual card number can be both faster and provides an added layer of security,” added Margaret Ryan, VP of emerging payments product management at American Express.

While it has become evident that security goes hand in hand with convenience for consumers when it comes to payments, merchants have to be cognizant of how much convenience they can offer customers to enable secure payment systems while also hitting the mark in a satisfactory user experience.