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- Consumers, phones, payments, and fraud - a perfect storm for disruption.
When I talk about Burbank’s CPoI , one of the questions I am sometimes asked, is Will consumers tap their cards on their phones? If you think about CPoI with respect to any new technology, of course there will be a period of settling in; where the innovators and early adopters jump all over it, the more cautious folks watch for a bit before they get on board, and the laggards bring up the rear. The thing that will speed this process up, however, is that the process of CPoI (Tap and PIN) is not ‘new’. Only the channel is new. Contactless payments have been around since the early 2000s and consumers are as familiar and comfortable with paying this way as they are breathing. In fact, most consumers prefer contactless for its speed and convenience. And even more, they prefer making contactless payments using their mobile phone . So, it’s not a stretch too far to think that if consumers are already au fait with contactless and using their phones to make payments, then the next logical step is using their own device as a payment terminal – tapping their card against their phone. Don’t just take my word for it, though. Amazon, the world’s largest online retailer and innovator of the 1-click checkout also thinks so because it has just started using Visa’s Tap to Pay solution. Now, the team at Amazon would not mess with their incredibly good checkout experience if they thought consumers wouldn’t be ok with it. But if that’s not enough to satisfy you, let’s go a little deeper into why I think consumers will be happy to tap their phones. We are more attached to our phones than pretty much anything else The use of smartphones today is virtually limitless – banking, personal assistants, music players, TV and movie hubs, fitness programmes …. Phones can perform an ECG, take temperature, measure atmospheric pressure, navigate anywhere in the world, calculate, suggest, photograph, purchase …. We are comfortable accessing our banking information on our phones. We are comfortable having private and personal conversations using our phones. We are comfortable storing and sharing our photographs on our phones. We are comfortable loading digital versions of our payment cards onto our phones and making payments with them. All the things in our lives that we want to keep safe and private, we do on our phones. What I’m getting at here, is that there is an immense amount of trust placed in these devices that we have within arm’s reach almost 100% of the time. We live in a world of hackers and viruses In December 2013, Target experienced a significant data breach of the credit card details of around 70 million customers. This severely impacted its reputation and the trust customers had. This story isn’t unique. There are nefarious people all around the world constantly attempting to find system vulnerabilities to access credit card information for illegal gains. And these stories make the headlines, which is why there is a tangible sense of unease among consumers when providing card numbers online. Particularly with older generations who did not grow up with the internet and are incredibly wary of technology. And so, there’s a dichotomy between the growing desire to shop online and the fear of providing credit card details, which underscores the conflict between consumers' pursuit of convenience and their concerns over digital security. In 2020 Mastercard published a global study about ‘Credential on File’, which looked at the willingness of consumers to have their credit card details stored by online merchants, as well as their concerns – of which 72% agreed or strongly agreed they are concerned about someone stealing their saved card details. One could safely assume that this sentiment has increased as the rate of online payments fraud has accelerated since the report was written. 1 + 1 + 1 = CPoI If you put all these factors together, you get a pretty compelling case for CPoI adoption: Consumers love and trust contactless payments Consumers love and trust their phones Consumers have concerns about entering their payment card details online amid a growing landscape of online fraud Overlay these factors with the way people expect to move through the world these days – quickly and seamlessly, and you have the perfect storm for CPoI – an enabler of the safest and fastest way to pay online, using a process we already know and love, on our own devices. In my opinion, you don’t get much better than that. So, if you’re nodding your head to all this and thinking you need to get CPoI into your online payments experience, perhaps it’s time to give the team at Burbank a shout . We’ll be more than happy to show you a demo of CPoI in action so you can see for yourself how quick, easy, and safe online payments can be.
- Combatting fraud: Why AI is costing online merchants more than fraud (and how to solve this)
Yes, you read the headline correctly. AI is indeed causing online merchants to lose more money than fraud. Ten times more, to be exact. What makes this statement even more unbelievable is that many of the AI systems online merchants use are designed to mitigate fraud. To best explain, we need to look backwards… A brief history of payments, and fraud Fraud has always been an issue. As soon as some form of currency was introduced into society, people looked for ways to illegally gain a financial advantage. It wasn’t so long ago that cash was the main currency. And it didn’t take much for clever forgers to increase the sophistication of their illegal copies so that they were readily accepted, which created a significant issue for anyone dealing in cash. So, the banks devised an excellent workaround – cards. The reliance on cards increased exponentially as the level of technical proficiency needed to clone them was significantly higher than forging notes. However, with just a magnetic stripe and signature in the way of the fraudsters, they overcame this hurdle too. Enter Chip and PIN. The digital certificate in the chips means they cannot be cloned, and unless someone figures out how to read minds, the PIN cannot be stolen. And this is what makes Chip and PIN the most enduring and safest way to pay, ever. Now, in the digital age where customer experience is key, and everything needs to be as frictionless as possible, Contactless payments entered the equation. This game-changing technology has sped up the payment process, making in-store checkouts faster and easier. In the UK, the initial limit for contactless transactions was £10, then raised to £30 and subsequently £50. During Covid the Contactless limit was raised to £100 to support a more hygienic process. But of course, this also increased the amount that stolen cards could purchase. So, a safety limit is in place whereby a PIN is required every 3 taps or £150 – the cardholder is required to input the card and enter a PIN to safeguard against fraud. And of course, we now also have digital wallets like Apple Pay and Google Pay to further improve the payments process, which are purely Contactless transactions with a biometric component, such as face ID or fingerprint. The endless cycle of fraud Einstein’s 1st Law of Thermodynamics says that “ Energy cannot be created or destroyed, it can only be changed from one form to another". It’s the same with fraud – it never goes away, it just changes to another form, as evidenced in the above history. Chip and PIN has significantly reduced the advent of fraud for in-store/in-person payments because cloning a card is impossible. And so, fraud has now mostly moved online, where payments are deemed by banks as ‘card not present’. These transactions come with much higher merchant fees because it’s so much easier to complete fraudulent transactions. And it’s a significant global issue. Let’s take a moment to look at some sobering figures: The cost of chargebacks (which is when a consumer disputes that an online purchase was made on their card and the merchant has to refund the money even though the goods have been sent) to merchants is currently $40 billion globally. The cost of false positives (which is when fraud detection software deems that an online transaction is fraudulent and blocks it, when in fact the purchaser is legitimate) is $443 billion in lost sales per year. The average online merchant uses (and pays for) five fraud detection tools to reduce the risk of fraud. And judging by the figures above, the AI isn’t doing that good a job… or perhaps too good a job, if you see it that way. Either way, it’s stopping legitimate transactions too. So, here’s the question. If Chip and PIN has done such a good job of combatting fraud in-store (and who ever heard of an in-store false positive?!), then why don’t we use it online? Seems like a very simple answer to a very big problem. The solution: Bringing the terminal back to the consumer, but in a new way Everyone has a phone. And there are excellent payments solutions out there that turn phones into payment terminals to help merchants accept payments anywhere – on a street, at events, at someone’s home. Literally anywhere. So, if merchant’s phones can be turned into secure payment terminals, then surely we can turn anyone’s phone into a payment terminal? The answer is, we can. Or at least, we at Burbank, can. Because we’ve developed a way to turn consumer devices into terminals that can accept card-present payments over the Internet (CPoI). And card-present payments make fraud very difficult in any channel – in person and online . Here’s how it works: Burbank’s CPoI turns the customer’s device into a PCI-compliant payment terminal. Merchants only need a card-present agreement. At checkout, the customer taps their card against their own device and securely enters their PIN to complete payment. Just as they do in-person / in-store. These transactions use Burbank’s unique patent-pending technology and existing payment messages to offer merchants and consumers the safest way to pay online . The fascinating thing about all this, is that while technology can (and does) improve so many aspects of our lives by making things more accessible, faster, and easier, sometimes it also makes things more complex, harder, and in the case of payments, riskier. The irony is not lost on me that the solution to 100% eliminating false positives and significantly reducing chargebacks is to go back a step and use technology that has been around for twenty years – the trusty, proven, familiar, and universal Chip and PIN. Often the pendulum swings too far in one direction and has to right itself to get the balance back in order. And that’s exactly where we’ve landed with Burbank’s CPoI. By bringing the terminal to the customer in any channel, we’ve enabled the same, safe, simple, and secure payment process for anyone, anywhere. And the even better news is that it’s ready to go! If you’re interested in hearing more about CPoI, reach out to the Burbank team .
- Dynamic pricing and false positives – a potential CX disaster
Dynamic (or surge) pricing is the automated adjustment of prices according to fluctuations in demand. Typically, the price is increased as demand goes up. Dynamic pricing has been the norm in industries such as travel, accommodation, and ride sharing for some time, and more recently has become a key revenue optimisation tool in sectors such e-commerce, energy, and entertainment. If you’ve been following my latest articles , you’ll know just how big the global challenge of false positives has become. And, how false positives are only going to get worse as the use of fraud mitigation AI systems become more deeply integrated into the online payments experience. So, what does dynamic pricing and false positive have to do with each other? In short, they are the recipe for an absolute disaster of a customer experience. I’ll use an example of buying air travel to explain… False positives are a CX nightmare for the travel sector Booking air travel online can take hours. Searching for flights across multiple booking platforms, comparing fares, aligning times and dates with accommodation - it’s not a 5-minute process. In fact, according to TravelPerk , the average traveller spends over 5-hours consuming online travel content to seek inspiration and plan their trip. Just imagine you have spent hours online creating the perfect itinerary. All your flights are in your cart, you have the perfect dates, you’re happy with the fare, and you’re all set to pay and confirm your trip. You get to the checkout, enter your card details, and the booking platform rejects your payment. And not because you have insufficient funds – it’s been rejected because the AI the booking platform uses isn’t certain enough that it’s actually you making the booking. Now, in this scenario, you have two choices – you can get on the phone or a chat bot, wait for some untold length of time to speak to a human and work through the payment. Or, you can go to another booking platform, complete your search and find the flights all over again, and see if they’ll accept your money. I would hedge my bets that most people would take option two. Now heavily invested in this process, most people just want to get their holiday booked. The issue here is that the person already has their flights in a cart with another booking platform. The airline(s) know this – but what they don’t know is that the same person is now booking yet another itinerary. So, it looks like a surge in demand for these flights. And of course, the cost of the fares is going to increase. The would-be traveller is now having to pay MORE for the same itinerary they just tried, and failed, to book. Through no fault of their own. Neither scenario is a positive experience. Hours wasted. Much frustration. And undoubtedly, you’re going to tell everyone you know what a terrible experience you had. And all because the AI incorrectly deduced that this was a fraudulent transaction, when in fact it was not. Sizing the problem I’ll go out on a limb here and say that fraud combatting AI could be more of a hindrance than a help in this type of scenario. We know that false positives are caused by AI incorrectly identifying a legitimate transaction as fraudulent, and that this is ten times more costly than online payments fraud, not to mention the significant reputational damage this would cause for the booking platform. With around 80% of consumers booking their travel online and a global travel sector worth $667.55 billion in 2023, this is not a small issue. The solution is in the way we pay Having just written a page or so on a pretty big problem, I am happy to say that there is a solution to this. And it’s brilliantly simple. Change the way we pay online. Fraud, false positives, and the terrible customer experience scenario I just outlined could all be solved or significantly minimised if we made online payments more failsafe. I’ll break it down: Online payments are ‘card-not-present’ transactions. That is, there is no categoric way toconfirm the person typing in the card details is the card holder. Fraud combatting AI only exists because the rate of card-not-present fraud is increasing exponentially. False positives only exist because the fraud combatting AI often mislabels legitimate transactions. You know where none of these problems exist? In-store, where payments by card are called ‘card present’ because there is a categoric way to prove the person presenting the card is the cardholder. It’s called a PIN. So, if we can make online payments card-present payments by having the consumer enter their PIN as part of the online payment process, then we have no need for fraud combatting AI, which means there will be no false positives, far less fraud, and the terrible CX scenario becomes a thing of the past. Yes, you are right in thinking this sounds too simple. Where’s the catch? The short answer is that there is no catch outside of having the technology to enable card present payments over the internet. And until recently, it didn’t exist. But it does now. And it’s ready to go. Card Present over Internet (CPoI) Burbank’s CPoI enables tap and PIN payments over the internet using the consumer’s device. The process is fast, simple, and secure. Tap and PIN is the globally familiar, simple, and universally trusted way to pay. But better yet, there are zero false positives, less chargebacks, lower processing fees, and simpler payments infrastructure. It is, simply, the best way to pay online. If you’re interested in talking to us more about CPoI and how it can revolutionise your online payments process, reach out to the Burbank team today.
- False Positives: The big problem you don’t know you have
Any merchant who sells online knows about payments fraud and chargebacks. This is a significant global issue costing over $40 billion a year and is only possible because the way we pay online isn’t bulletproof. In-store, we pay with a physical card and, depending on the size of transaction – a PIN. Card and PIN has been around for a couple of decades and has proven - without a shadow of doubt - to be the safest way to pay. No matter the sophistication of a fraudster, they cannot read minds to obtain someone’s PIN. Online however, there is no PIN. And there is no physical card. There’s only the information contained on the card, which anybody can enter. There is no categoric way to prove that the person entering the card details online is in fact the card holder. And this is why there are $40 billion in fraudulent online transactions taking place every year. To combat this issue, the average online retailer uses up to five AI systems to analyse a range of data to assess the probability of each transaction being fraudulent. The AI looks at things like: location of the device the customer is using the purchase history of the buyer, for example if the buyer has already purchased a similar item recently whether the item being purchased is in line with the buyer’s normal purchase profile volume and frequency and so on …. The payment process looks something like this: If the AI deems that the transaction is likely to be fraudulent, it will not allow the sale to proceed. And the merchant will receive a comprehensive report detailing all the ‘fraudulent’ transactions that have been stopped. You might wonder why I say ‘fraudulent’ . That’s because there’s a very high chance that the majority of the transactions AI deems as fraudulent (and therefore blocks), are not fraudulent at all. This is called a false positive. Now here’s the big question – how would a merchant know how many of the transactions the AI is stopping are in fact legitimate? The short answer is, they don’t know. In fact, I would say most merchants have no idea they are missing out on a staggeringly high volume of legitimate transactions that have been deemed as fraudulent. How do I know this? Well, a recent article by Mastercard reports that false positives are responsible for $443 billion in lost revenue each year. This is more than 10 times the cost of chargebacks Now, while lost revenue is a substantial cost, there are indeed other problems that false positives bring: Diminished customer relationships: There’s nothing like being declined a transaction to erode the trust and goodwill of a legitimate customer. Reputational damage: Word of mouth spreads quickly and no doubt any customer who has had a transaction declined is going to talk about it. Time and resources: Time spent manually reviewing transactions that have been deemed fraudulent. The greater the number of transactions deemed fraudulent, the more time and resource required to analyse the information. Not to mention the significant time spent using that data to make decisions. Overcoming the false positives challenge A quick internet search will give you resource upon resource on how to combat false positives, and there will be a myriad of (time consuming) recommendations to minimise the risk and impact to a merchant’s business. But these steps and measures all work within the current landscape. That is, they don’t get to the source of the issue, which as I talked about right at the beginning of this article, is the fact that the way we pay online, is fallible. I think you’d be hard pressed in your internet search to find a false positives workaround that actually addresses the root cause of the problem. The answer, of course, is not to throw more brain power or fraud combatting AI at it. Surely it is to pay online as we pay instore. Quite simply, to make card present payments possible over the internet. Reliable and trusted Tap and PIN. The good news is that this is already possible, with Burbank’s groundbreaking technology and it’s called CPoI , (Card Present over Internet). CPoI turns consumer devices into the merchant terminal so they can facilitate card-present payments over the internet. During the checkout process the customer simply taps their card against their own device, and securely enters their PIN, creating a card present transaction. This offers a range of benefits including liability shift (away from the merchant), lower processing fees, and a significantly easier customer experience. But the best part, is that there are zero false positives with CPoI, which in turn significantly increases merchant revenue. And therefore, less reliance on fraud detecting AI systems. Let’s face it. Online payments were ripe for disruption. Merchants cannot keep increasing tools and technology for combatting fraud, nor can they continue to wear the cost of false positives. It simply is not sustainable. And now with CPoI, they don’t have to. If you’re interested in hearing more or seeing a demo of CPoI, reach out to the Burbank team.