MONTREAL, Oct. 23, 2018 /PRNewswire/ — Nearly half (47%) of Canadian online small to medium-sized businesses worry that the move to frictionless payments, such as transactions that take place behind the scenes in apps, is leaving them more open to fraud and will negatively impact revenues according to a new report from Paysafe. This concern is heightened by the fact that 73% feel they are being more aggressively targeted by fraudsters now compared to a year ago and 42% consider card fraud an increasing challenge.
These concerns mean Canadian SMBs now view security as the most important factor when considering their eCommerce setup. Security (65%) ranks above reliability (45%), cost (49%) and ease of transactions including refunds (45%). SMBs are also wary that these concerns may hamper the buyer journey for consumers. Over half (67%) believe that longer verification processes during the payment stage – which could potentially combat these issues – runs the risk of losing consumers, and 62% admit they don’t know how to balance security with an acceptable customer experience, highlighting the trade-off faced by online merchants.
Buying into a fragmented payments landscape
Leading global payments provider Paysafe’s latest research report, entitled Lost in Transaction: The Future of Payments for SMBs, is an international research report investigating the attitudes of small and medium online businesses in Canada, the US, UK, Germany and Austria to the evolution of payment types. It also incorporates further insights from offline, brick-and-mortar merchants in Canada and the US.
Abandoned transactions are also posing a problem for Canadian merchants, with 9% of purchases not being completed. Yet, while 21% believe this reflects successful fraud checks, 40% say abandoned transactions have a major impact on business performance. Notably, nearly a quarter (24%) of Canadian merchants believe purchases are abandoned purely because of a lack of payment options at the checkout phase.
When it comes to which payment options to offer, four in five Canadian merchants (80%) believe offering multiple choices is essential, while 83% plan to introduce new payment methods in the next two years. Credit cards (offered by 86% of Canadian online merchants) remain relatively ubiquitous, while 38% of merchants currently accept digital wallets, with a further 14% looking to adopt them over the next 24 months. Meanwhile, 59% believe accepting prepaid cards gives access to new customers, and 39% say they will offer online cash replacements in response to consumer demand, and to service the unbanked, in the next two years. One method with the greatest anticipated gains is mobile apps, with 41% planning to offer them in the next two years, up from 15% currently.
More innovative forms of payment
But merchants are also taking notice of macro consumer trends. 62% agree that consumers want more innovative ways to get short-term credit, as evidenced by the recent rise of ‘Pay Later’ style products which give consumers more flexibility. They also appear to be conscious of ‘proactive innovation’ – a surprising 41% of Canadian SMBs in physical retail premises say they will be capable of delivering Amazon Go-style checkout-free stores in the next two years, to improve customer experience and reduce friction.
Todd Linden, CEO, Payment Processing North America, Paysafe Group, commented:
“Canadian online SMBs want to be able to compete with their bigger rivals but find it difficult to get the right blend of security and making the consumer’s payment journey as simple as possible. But as frictionless payments become ever more important and Canadian merchants acknowledge the need to adopt new payment methods, solving this clash is critical. Delivering new ways to pay is now a business imperative. This may go some way to explaining the rise of prepaid cards, online vouchers and cash replacement systems, which can alleviate these issues for both consumers and merchants.”
North American contactless boom
In Canada offline merchants are also pushing to accept contactless transactions, but are further ahead in their adoption than their US counterparts. Sixty nine percent expect to offer it over the next couple of years (compared to 49% at present) compared to 62% in the US, where just 37% offer it currently. These findings may be symptomatic of a fragmenting payments landscape, with 28% of Canadian merchants reporting a decrease in cash payments in the past year. Research undertaken earlier this year showed 54% of UK consumers recently made a contactless payment, compared to only 19% in Canada. But Canadian merchants’ willingness to speed up in-store payments (69%) and enhance transaction efficiencies (66%) could finally symbolise a step change in innovation.
Readiness for invisible payments
Canadian brick-and-mortar businesses also expect to widen their payments portfolio to appeal to consumers. Sixty-three percent believe they will have apps to allow customers to pay for goods automatically and similarly, 63% expect to have smartphone driven systems. 41% even expect to have fully frictionless, Amazon-Go style systems – a clear departure from the largely card-based delivery still widespread currently.
Necessary decision to better their businesses
“It is clear from these findings that Canadian merchants – both online and offline – are planning vast changes in their transaction portfolios in the coming years. These are being driven by a desire to balance security, flexibility, frictionless payments, efficiency and speed. What comes across clearly is the ambition of businesses across the card present and card not present space to innovate in response to what their customer base is asking for,” added Linden.
About Lost in Transaction: The future of payments for SMBs research
Over 2017 and 2018, Paysafe has published a number of independent research reports in the Lost In Transaction series. This new volume – supported by London-based agency Loudhouse in Q3 2018 – looks at the evolution in demand from merchants in the small business sector for payment types.
The merchants surveyed for the report form two groups. We surveyed businesses that accept card not present transactions (online merchants) and ones that accept card present transactions (offline, bricks-and-mortar merchants).
The card not present merchants comprised 601 companies from the US, Canada, UK, Germany and Austria, employing between 1-50 employees and making $60,000–$10m in sales. The card present data comes exclusively from 306 US and Canadian businesses with the same revenues and levels of employees.
About Paysafe Group
Paysafe Group (Paysafe) is a leading global provider of end-to-end payment solutions. Its core purpose is to enable businesses and consumers to connect and transact seamlessly through industry-leading capabilities in payment processing, digital wallet, card issuing and online cash solutions.
With over 20 years of online payment experience, an annualized transactional volume of over US $80 billion, and approximately 3,000 employees located in 12+ global locations, Paysafe connects businesses and consumers across 200 payment types in over 40 currencies around the world.
Delivered through an integrated platform, Paysafe solutions are geared toward mobile-initiated transactions, real-time analytics and the convergence between brick-and-mortar and online payments.