Why You Should Be Concerned About Online Fraud
E-commerce has been growing at a dizzying pace for years. The adoption of mobile devices by consumers is boosting the potential of e-commerce even more. Global e-commerce sales are growing by almost 20% per year. It is hard to argue with the success story of e-commerce. The success of e-commerce has unfortunately also lead to an increase of cyber crime. Reported incidents are also rising rapidly which is threatening the e-commerce business on a number of levels that all affect your business.
The first issue at hand is trust. In a world where a buyer and seller of a good do not know each other and do not see each other, it is paramount that there is a high level of trust. We all know of incidents where consumers have become a victim of a scam. Various studies over the years show consumers are still wary of providing their personal and financial details to an online store, because consumers entrust the online store to treat their personal and financial information securely. Studies show time and time again that consumers are more cautious when they shop online, and some buy fewer items because of security concerns.
The second concern is liability. As it stands now the inherent risk of all e-commerce transactions lies with the financial institutions who provide the transaction (i.e. Visa or PayPal) between the selling and buying parties. In order to protect themselves from threats of fraud they have taken a risk-based approach, meaning that they instill (insurance) policies to cover the transactions. This means that consumers and businesses automatically assume liability if they fail to follow certain policies when making or accepting transactions. The shift of this liability may lead to a lesser sense of confidence in online payments.
The third concern revolves around security incidents. These have a large impact on the level of trust consumers (and businesses) have in online payments and subsequently your online business. With every transaction consumers provide their personal and financial details. This means that the ensuing transaction needs to be processed and stored securely. Companies and financial institutions need to take the required steps to ensure this safety. There are various standards that your company may need to adhere to such as PCI-DSS. Security breaches can lead to (significant) fines, costs for cleaning up the incidents, a loss of (critical business) data, ability to process transactions.
The aforementioned security incident can have significant impact on our fourth concern: customer retention. You should be concerned about retaining your customers if a security breach occurs. A recent research from Uisys’ Security Index in Australia found that 85% of respondents would take their business elsewhere, while 47% would take legal action and 64% would expose the issue in a public forum”. This shows that consumers take trust we discussed very seriously. And the best way to deal with an incident is to be open about it and use the right communication channel. This shows you are aware of the sensitive nature of the issue and that you are dealing with the situation.