By Andrew Reszka, Regional Head APAC
One of the objectives of customer service today is to create ‘frictionless experiences’. That is, removing the difficulties and obstacles in providing the best service possible. The payments world has taken this to heart with the increasing emergence and adoption of contactless payments. Take Uber, for example. The choice to ride with Uber is all about the hassle-free or ‘frictionless’ payment experience. Tap on your phone, wait for the car, reach your destination, exit the car, and that’s where it ends. There is no friction, because no cash changes hands. No cards are swiped or receipts signed. It is a great end-to-end customer experience, made possible through the seamless connection of the front-end interface with back-end payment systems.
Uber has successfully illustrated how important contactless and frictionless payments are to customers. As a result, we are witnessing huge developments in reducing the friction of payments even further. But as with all technology, the challenges with contactless payments are many: concerns about identity theft and fraudulent transactions increase with every case of a security breach. While it is convenient for customers to make mobile payments, and it elevates the customer service experience, we must remember that it is also becoming more convenient for criminals to commit fraud.
Cardholders can integrate their bank accounts or credit cards to their phones and apps, so that their virtual wallets never run out of cash. Furthermore, cardholders are rewarded with loyalty points for using the store’s mobile payment system. Payment is quick and easy; open the app at the point-of-sale, scan the virtual QR code, and your purchase is complete.
Fraudsters have found ways around this system, especially when log-in security for these apps is weak, allowing hackers to break into cardholder accounts with ease. Linked accounts make customers even more vulnerable as the criminal can simply make multiple purchases, often loading new gift cards with funds from the hacked account.
Issuers and merchants are struggling to find the balance between security and convenience for their customers. Frictionless payments present various security concerns, where without the verification methods commonly used at the POS, such transactions become more vulnerable. Technologies such as EMV credit card transactions are becoming more secure and as the opportunity for fraud diminishes, criminals will turn their attention to other types of contactless payments.
Mobile payments facilitate card-not-present (CNP) transactions and the increased risk is sometimes a new, unexplored threat for merchants who only processed card-present transactions before. While fraud presents dangers like identity theft to customers, the threat is manifested to businesses in the form of chargebacks. When criminals gain access to stolen bank and financial information through frictionless payment capabilities and conduct unauthorised transactions, the innocent cardholder is entitled to the protection offered by a chargeback.
Any time a merchant processes an unauthorised transaction, they run the risk of receiving a chargeback. If contactless payments increase the dangers of fraud, it necessarily increases the risk of chargebacks. As alternative payment technologies continue to evolve, merchants must weigh the risk of fraud and chargebacks versus reward of seamless customer service.