Merchants may be losing out on potential ecommerce sales due to shoppers’ concerns over the security of their information in the digital world, according to a survey released today by American Express. The 2017 American Express Digital Payments Survey shows that consumers are increasingly relying on online and mobile technology to make purchases, opening new opportunities for merchants to reach more customers and grow revenue. Among U.S. merchants that have both ecommerce and physical retail operations, 81% view online and mobile sales as the channel with the biggest growth opportunity for their business, according to the survey. To effectively capture that potential growth, the results show that merchants should prioritize the security of their interactions with customers online as much as the checkout experience, as many consumers say they have abandoned making an online purchase over security concerns.
The survey findings are based on responses from 1,020 U.S. consumers1 and 401 U.S. merchants2 and reflect online shopping habits on desktop computers and mobile devices. The results show that merchants and consumers are increasingly conducting commerce through digital channels. Nine-in-ten (90%) U.S. consumers say they have made at least one online purchase in the past 12 months, and more than seven-in-ten (73%) have made three or more online purchases in the same time frame. Nearly half of online shoppers (47%) say they have increased the frequency of their online purchases in the last year. At the same time, 71% of merchants say the proportion of their annual sales generated through online and mobile channels has increased over the previous year.
As consumers shift more of their spending to digital channels, they’re also showing a strong propensity for using digital payment options. More than 70% of online shoppers say they have used digital-payment services, including mobile wallets, one-click checkout buttons and P2P payment apps. And four-in-ten (41%) say they always or sometimes use such digital solutions when they pay. Internet-connected, voice-activated devices, are also poised to further shape consumer purchasing behavior: 18% of consumers surveyed say they are very likely or somewhat likely to use voice-activated services to make a purchase in the future. With industry estimates predicting a surge in Internet-connected devices in the coming years, the number of consumers who may ultimately use such gadgets to make a purchase is likely to grow in the future.
Security Concerns Put Purchases on Pause
While consumers are doing more of their shopping online, they also place a high priority on payment security. Of consumers who have made three or more online purchases in the last year, nearly four-in-ten (37%) say they have abandoned an online purchase because they did not feel their payment would be secure. At the same time, 73% of merchants say their level of fraudulent online sales has increased or remained the same over the past year. This suggests that while consumers are increasingly shopping online, merchants have an opportunity to capture a larger share of their customers’ online spending by taking steps to reduce fraud and enhance security in their digital channels.
“Digital innovation is enabling consumers to buy from merchants when and where it’s most convenient for them,” says Mike Matan, Vice President, Industry Engagement, Product and Marketing, Global Network Business, American Express. “But the results of our survey show that for merchants to capitalize on consumers’ continued shift to online and mobile commerce, they need to provide their customers with the confidence that their information is secure.”
Security Investments and Incentives Can Boost Sales Growth
The survey found that investments in online security yield tangible benefits. Among the 71% of merchants that have experienced an increase in online and mobile sales over the last year, more than half (58%) say that enhanced security features have had a very significant impact on their sales. Other factors that have had a very significant impact on their sales include an improved checkout process (54%), the availability of free delivery (55%), marketing offers and discounts exclusively for online customers (53%), and a general consumer shift toward online shopping (54%).
The good news is many merchants are prioritizing security investments. In the past year, merchants spent 31% of their IT budgets on payment security, according to the survey. In addition, more than half of merchants (54%) report that their budget for payment security will increase over the next year.
But there are key steps that more merchants can take to boost security in digital channels:
- A little more than half (53%) of merchants take the simple step of requiring customers to enter the CVV code found on credit cards for online purchases.
- An even smaller percentage of merchants say they offer technology to confirm customers are not robots (42%) or utilize data encryption for their online channels (40%).
- Just four-in-ten (39%) merchants decline transactions when a verified billing address has not been provided.
- Only 38% of merchants require customers to set up an account before making a purchase online.
In addition to having peace of mind about the security of their payment information, consumers are also drawn to digital channels for other reasons. Nearly eight-in-ten (79%) consumers who say they would be more likely to purchase an item in-store rather than online say an offer for free delivery would cause them to reconsider and purchase the item online instead. Similarly, 75% of consumers say discounts available only for online purchases would prompt them to purchase online instead of in-store, while 50% say the ability to earn exclusive rewards for online purchases would prompt them to do the same.
Consumers and Merchants Agree: Cash Is No Longer King
As online commerce grows and consumers continue adopting digital payments, more merchants and consumers are also turning away from cash. One-in-five (20%) consumers say they currently are not carrying any cash in their wallet, and nearly half (46%) say they rarely or never use cash for making purchases. This has not gone unnoticed by merchants: among those that currently offer cash/check payment options to their customers, two-thirds say they are very (36%) or somewhat (31%) likely to go completely cashless.
The 2017 American Express Digital Payments Survey was conducted among U.S. consumers and merchants that offer online/mobile payment options to their customers.
The consumer portion of the study is based on an overall sample of 1,020 respondents weighted to U.S. census based upon gender, age, education, race and region. Unless otherwise noted, responses among consumers represent those who have made an online purchase three or more times in the past 12 months based on self-report. The sample size of n=775 has a margin of error of +/- 3.5 at the 95% confidence level. The anonymous survey was conducted online May 8-10, 2017.
The merchant portion of the survey was conducted online among a sample of 401 business leaders in the U.S. who have responsibility for making decisions regarding customer payment options, IT/data security, or online sales strategy and planning. Respondent companies must offer credit/debit card or digital payment options to their customers through online/mobile channels. The sample for the study came from an online panel. The business sample has a margin of error of +/- 4.9 at the 95% confidence level. Fieldwork was conducted May 16-23, 2017.
About American Express
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2Merchants refer to those businesses that accept payments on a traditional website, mobile website or mobile application.