Are easy online transactions forcing consumers to make moral concessions they wouldn’t otherwise allow?
Chances are you’ve shopped online in the last few weeks, as nearly 70 percent of Americans make purchases online at least once a month. Clearly, you aren’t alone. By 2020, global ecommerce sales will surge from 7% to 15% of overall retail sales — representing a cool $4 trillion.
At the same time, fraud is increasing right alongside purchases. Ecommerce will surrender $31 billion to chargebacks in 2020. With losses like that, it’s tough to argue against the hoards of fraud prevention solutions ecommerce merchants implement to protect their businesses.
These innovations in fraud prevention technologies are forcing consumers to make moral concessions that they would never ask of their peers, nor think necessary. But in our current payment landscape it’s absolutely necessary, for both merchants and consumers.
Transactions Demand Concessions
The major card networks guarantee zero-fraud liability for credit card-carrying consumers. Which means that consumers are protected against fraudulent activity whether they’re duped by a shady merchant or have their personal info, i.e. payment card data, compromised. If the cardholder believes they’ve been a victim of fraud, he or she simply needs to call or click to dispute a transaction through their card issuer.
More often than not, the customer dispute results in a refund of the transaction amount. This right to dispute, also referred to as a cardholder’s chargeback rights, forces merchants to protect themselves against the possibility of processing fraudulent transactions. From the consumer perspective, it may not seem Earth-shattering to give a company your email address during the checkout process. It’s generally accepted that a merchant needs to communicate with you securely and to verify that it’s actually you attempting to complete a transaction.
What most don’t know is that a simple email address is actually one piece of a complicated web of data that’s quickly spun together to “score” you. Even something as simple as downloading an app means that you agree to have your thumbprint, gestures, and more gathered and stored in a data warehouse. The data warehouse is connected to many others, each culling together your behavior, predilections and preferences.
Given sufficient data that doesn’t trip a preconfigured wire, you’ll be granted access to make a purchase. Of course, this is all done to ensure two good things. One, your money is not used without your permission. Two, the merchant doesn’t ship a product or sell a service that will ultimately not be paid for.
It’s called behavioral biometrics and it’s learning how to identify us based on our daily routines. The technology records the user’s typing cadence, pressure levels when selecting screen items, the pressure used when typing, the angle the phone is held, screen scrolling habits, and utilizes a smartphone’s built-in accelerometer and gyroscope. All of these data points come together to create a customer profile: a statistical model of how you use the device that you cannot delete.
But those data warehouses are the same ones the thieves pulled your payment card info from and likewise are all vulnerable. It seems that every quarter a new data breach occurs, compromising data from millions of consumers. We’ve come to terms with our credit card information being compromised, but what about intimate details of how we interact with the devices we use every day? Is identity theft about to escalate to unforeseen heights?
Ecommerce merchants are pouring money and resources into fraud filtering technology, most of which consumers remain unaware. With just an email, merchants using solutions like Emailage, which can review social profiles, Pandora playlists and more.
As mentioned previously, solution providers like SecuredTouch are also using gesture recognition and behavioral biometrics to build a profile of your smartphone usage patterns. In addition, other fraud scoring solutions utilize algorithms that communicate on human behavior and constantly redefine what fraudulent and legitimate users look like.
The data collected by these solutions allows merchants to build a standard distribution of transaction activity. Without a doubt, this creates efficient modeling. But its risks are still unknown.
Our consumption habits, the convenience of ordering online, enjoying the fruits of a global economy – all of these elements working together have created a need for a new way to define, fingerprint, and categorize the human species. How do we behave when we’re making legitimate transactions? How does that differ from our behavior during fraudulent transactions?
With behavioral biometrics, we’re inching closer to the answer. But what else will we uncover?
Driven By Archaic Technology
The concessions consumers make are a result of, at least in part, the archaic pieces of our payment system. EMV technology and others are putting bandaids over what we currently have. We continue to look to FinTech to stay a step ahead of the criminals and build a better system.
The road may be rough, but we’re definitely going places. And fast. Until that day arrives, we’ll likely keep making little known concessions to help protect us from fraud.
“Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety.” – Benjamin Franklin