Traditional vs. frictionless payments: Will customers trade security for convenience?

As the coronavirus pandemic restrictions are lifting across the country, consumers are venturing out and purchasing at retail, grocery and food establishments. Will they return to traditional means for payments such as withdrawing cash for purchase from ATMs or using debit cards, or will they stay transitioned to mobile and digital payments in the future due to convenience? What role will security play in this decision of is it a factor at all?

ATM Marketplace reached out to Daniel Kornitzer, Paysafe's chief business development officer, to discuss a recent study Paysafe conducted entitled, Lost in Translation, focused on the impact of COVID-19 on consumer payments.

Consumer concern regarding data protection and potential loss from fraud was important to 34% of consumers surveyed, according to the data. Ensuring financial data was kept secure, so fraudsters could not access it, was important to 32% of consumers. Data loss and prevention of data access proved more important to those consumers surveyed than the speed of online transaction (21%) or the ease of the customer checkout experience (17%).

Paysafe research found a clear pattern has emerged during the pandemic; security is the most important factor for the majority of consumers. Diversifying payment methods and encouraging the use of biometric authentication can shift the perception of security vs. convenience in consumers' eyes, creating a new wave of e-commerce customers that are a hybrid of both traditional banking methods as well as newer security-centered methods.

Q: How has the coronavirus impacted payment preferences of consumers?

A: COVID-19 has driven a surge in contactless payments in the US, including mobile wallets, online cash and frictionless apps. As payment habits evolve over time, so do consumer attitudes towards security.

Adapting to changes in daily life during the pandemic has caused a greater reliance on e-commerce, and has also resulted in increased demand for in-store secure contactless payment options. This is reflected in the 36% of American consumers surveyed in our recent study on the impact of COVID-19 on consumer payments that protection against loss from fraud has become more important to them following the outbreak.

Q: How can diversifying payment methods and encouraging the use of biometric authentication shift the perception of security vs convenience for consumers?

A: When it comes to e-commerce, offering more payment options at checkout is a good way for businesses to cater to consumers who are concerned about the safety of their financial details. More than half (53%) of our study's respondents said they believe biometric authentication makes payments more secure, but 59% are still anxious when a transaction does not require a password for payment.

We anticipate that as online businesses continue to develop their m-commerce platforms and educate consumers on security within the payments industry, the benefits of biometrics will become more accepted. As we move into an increasingly digital-focused society, biometrics will likely become more convenient and less of a perceived security threat to consumers.

Q: Why is security now more valued than convenience? Do you anticipate that changing, or fluctuating, in the future?

A: Most (82%) of the consumers we surveyed believe there's a current imbalance between security, convenience and fraud protection. In fact, 48% of American consumers are willing to accept the tightening of current security protocols if it meant fraud would be eliminated.

For merchants, while it may seem that prioritizing a frictionless shopping experience would be the top way to boost sales, the reality is that if a sophisticated shopping experience leaves customers concerned about the security of their financial data, those sales will still suffer.

Q: Is online shopping still a security concern for consumers? How has attitudes toward online shopping changed over the course of the pandemic, and where have companies looked to increase security?

A: Yes, there are definitely some consumers that are still hesitant to make shopping online a more essential part of their routine, whether that's for groceries or household items. However, there are others who are shifting their shopping habits online to adapt with quarantine requirements.

In the US, 25% of our survey respondents noted they are now shopping online for the first time ever. But the novelty of the experience is a likely contributor to the large number of consumers still uncomfortable entering their financial details online to make a payment on an unknown website. Approximately 68% said they were more likely to shop with businesses where their financial data had already been stored, which underscores the notion that convenience is still a major factor in payment preference.

For merchants, this is an opportunity to adapt their payment offering for consumers who continue to feel unsafe entering financial data.

Q: Digital wallets are gaining popularity because they don't share financial data. Do you anticipate the use of alternative payment methods, especially digital wallets, to increase after the pandemic and how will that landscape look in five years?

A:According to our research, a diverse online checkout experience, which includes options allowing the consumer to keep financial details private from the merchant, like digital wallets and prepaid cards or vouchers, are particularly popular. Digital wallets are a great example of contactless payments, which are only now becoming prevalent among consumers.

Nearly two-thirds of respondents (75%) are more comfortable using a digital wallet to make an online payment, while 56% are more comfortable using a prepaid card or voucher where their financial details weren't disclosed.

Looking ahead, the evidence points toward digital wallets and alternative payment methods continuing to rise in popularity as more commerce moves online and consumers pivot their shopping habits for the long term.

Q: Paysafe's study indicates more than half of consumers (53%) see biometric payments as more secure than other forms of payment verification, but consumers still seem to have security concerns and uneasiness regarding this technology. How do you see the implementation of biometrics going forward?

A: Biometrics are especially beneficial for consumers who shop online on their mobile phones. While there is growing support for this method of payment verification, some people are still concerned that this level of security isn't strong enough to protect their financial data. As more businesses continue to develop their m-commerce platforms, they should also focus on educating consumers on the security and convenience of biometric authentication.

Q: As businesses begin to reopen, how will consumers' preferences on payment methods change the way merchants operate?

A: As markets begin to open all over the world, businesses will need to be more discerning than ever, assessing emerging consumer payment trends and preferences to adequately leverage the benefits of a seamless frictionless shopping experience. With security and convenience being top priorities for customers, businesses may also find that promoting alternative payment methods and biometric authentication consumer concerns can be shifting into a positive perception.