Financial Planning

Security fears put consumers off ‘frictionless’ payments

By Paysafe
Financial Planning
Published: 8 June 2018

The shift towards ‘frictionless’ payments – i.e. invisible transactions that take place ‘behind the scenes’ in apps – is being held back by UK consumer concerns over security and data privacy, according to new research conducted by Paysafe. The report uncovers some unexpected findings. For these ‘invisible’ payments, figures show:

  • 52% of UK consumers cite fraud as the biggest barrier to using them. 43% express concerns around the use of their data;
  • Two thirds of British consumers (67%) think voice-activated systems are not secure. 69% worry about being overcharged if they used this type of service; and
  • 59% report that checkout-free stores – where smart technologies record the shopping basket and automate payments – sound too risky, or they’d need to know more before using them.

Meanwhile, other emerging payment methods are polarising consumer opinion – 39% of the UK public would let fridges automatically re-order food, but 43% don’t expect to adopt the technology in the next two to three years.

The report, called Lost in Transaction: Payment Trends 2018, is an international research study investigating consumer attitudes to new and traditional payment methods. The research incorporates consumer views from the UK, US, Canada, Germany and Austria, and draws comparisons with the inaugural Lost in Transaction report in 2017.

Perhaps surprisingly, cash continues to thrive as the most common form of payment: 88% of consumers used it in the past month to make a purchase. ATM visits were up too – 89% had visited one in the last month compared to 84% in 2017. Yet, as contactless has expanded, 62% of UK consumers carry less cash than a year ago, falling from an average of £33 last year to £21 in 2018.

Contactless has continued to grow rapidly in the UK, where 54% of consumers had used it in the previous month. That’s in stark contrast to the US at just 3%, in spite of the fact that 40% of Americans reported trying contactless in 2017. In Canada, 58% of consumers tried contactless in 2017 but only 19% used it in the last month.

However, even if people are carrying less physical cash, they are finding other ways to keep cash at the forefront in the overall mix. While the UK has the highest adoption of contactless, in Austria and Germany, cash replacement systems are being used by 12% and 9% of respondents respectively; and in North America, prepaid cards are the most popular cash alternative, used by 18% of Canadians and 16% of Americans respectively.

Commenting on the research, Oscar Nieboer, Chief Marketing Officer, Paysafe Group, said: “Despite the apparent benefits of low-friction payment technologies, these findings suggest many consumers aren’t ready to lose visibility of the payment process. It’s clear that the benefits are not unilaterally agreed upon, with cultural and infrastructure trends at play, and it may be some time before adoption is widespread. In the meantime, there’s a need to continue serving the cash consumer, as well as providing options for contactless payments as the UK is so advanced in this area of payments compared to other countries.”

The report also highlights the growth of digital wallets: 61% of UK respondents had used one for an online purchase in the past month – more than either credit or debit cards. Digital wallet usage averaged 50% globally and ranged from 39% in the US to a high of 61% here in the UK.

But when it comes to fraud, the report highlighted a convenience versus risk paradox and a geographical split in how fraud impacts payment behaviour locally:

  • 65% of Britons and 70% of Americans believe online fraud is inevitable, but only 28% of Germans and 26% of Austrians hold the same view;
  • More consumers in Germany and Austria choose to pay by invoice rather than debit card. 55% of Austrians and 49% of Germans say it feels safer.

Nieboer adds: “If retailers, merchants and payments companies want to disrupt the old way of doing things they must make all underlying processes feel secure. Consumers want convenience, but they want protection too. They are making sensible choices when it comes to security and are willing to change what they’re used to ensure they’re not at risk of fraud. For instance, nearly four in five Britons prioritise the use of a website that already has their payment details – the highest amongst the countries surveyed in this report.”