Digital security concerns influencing consumer purchasing behavior, survey says

As more and more consumers migrate to online retailers such as Amazon and Overstock.com, online retailers are facing pushback on potential e-commerce sales because of concerns over the security of their information in the digital world, according to survey results from American Express.

The 2017 American Express Digital Payments Survey also shows that as online commerce grows and consumers continue adopting digital payments, more merchants and consumers are turning away from cash and shifting to digital payment options that fit their online shopping needs.

“Digital innovation is enabling consumers to buy from merchants when and where it’s most convenient for them,” said Mike Matan, vice president of product engagement and marketing for American Express’ global network division. “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.”

For example, 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.

Not surprising, 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.

The survey also found that consumers are placing a high priority on payment security. Of consumers who have made three or more online purchases in the last year, 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.

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, 58% say enhanced security features have had a very significant impact on their sales. Other factors that have had a significant impact on 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, 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; and
• 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.

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.

One-in-five (20%) consumers say they are not carrying 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 as most 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. 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.