Card Fraud: Consumer Fears Cut Into Sales

Integrated Solutions for Retailers, Matt Pillar

Thursday, March 17, 2011

Consumers are afraid of credit card fraud, but they don't understand how it happens well enough to take preventative measures. Findings from an ACI Worldwide survey of more than 4,200 consumers in 14 countries highlight the gap between perception and reality, but they also underscore an opportunity for retailers to gain consumer trust and strengthen their brands.

Among the findings of the survey:

* 50% of worldwide consumers worry about card fraud

* 10% of U.S. consumers carry their PIN numbers with their cards

* 21% do the same in Italy, 23% in India, and 27% in China

The research also indicates that in the U.S., nearly 20% of consumers throw bank statements or receipts in the trash without shredding them, 16% have accessed their bank accounts via the Web on a public computer or without security software, and 7% responded to e-mails or phone calls asking them for bank information.

Given that three in ten U.S. consumers have had a brush with credit card fraud, that consumers fear it comes as no surprise. If a consumer hasn't been affected personally, they know someone who has. Forty-nine percent of all respondents said their worry stems from the potential that their finances could be wiped out as a result of card fraud, leaving them with no means of payment. And the sputtering economy is increasing U.S. consumers' fear, uncertainty, and doubt: 58% think card fraud is increasing, and 74% are more worried about being victimized during tough economic times, when 37% say having less money in the first place would exacerbate the problem.

For banks and retailers, there's an opportunity for brand empowerment by instilling confidence in your consumer base through education. Specifically:

* Use established avenues of communication (billing statements, privacy and term notifications, personal e-mails) to teach consumers about fraud prevention measures. Don't take anything for granted &mash; include seemingly obvious best practices (i.e. memorize your PIN, don't carry it around with you.)

* Use these same vehicles to educate consumers on the payment security measures you have in place, ensuring them you take great care with their payment information.

* Make sure your online checkout process highlights your security measures at every click &mash; the ACI report revealed that 65% of U.S. consumers are concerned about using their cards online.

* Put together an informational mailer on the fraud protection features of your card offering. Be clear with consumers about the protections you afford them in the event their cards are compromised.

Reassure them that you're on their side, and that if they experience card fraud it's highly unlikely that they'll suffer great financial harm.

While the survey findings indicate a degree of naivety among consumers, they're also indicative of a well-intentioned populace that's concerned with the greater good. Jasbir Anand, lead solutions consultant at ACI Worldwide, said consumers are very concerned not only about how fraud can impact them personally, but as a greater society. "Globally, 15% of cardholders said their biggest fear about card fraud was their money being used to fund organized crime, compared to just 10 percent whose main concern was damage to their own individual credit rating," said Anand.

Reversion To Cash Creates Greater Loss Concerns The ACI survey found that fraud could influence consumers to revert back to cash, with 23% of U.S. respondents saying they would definitely use cash over cards following a fraud incident and an additional 62% admitting they would do so "in some situations." But a reversion to cash actually creates more risk of loss on the consumer's part, creates a consumer safety and cash intake burden for LP professionals, and increases the processing costs to retailers and banks.

Clearly, the best course of action for retailers and banks is to invest in preventing fraud from occurring in the first place. Consumer outreach and education can only result in more, safer, and more efficient card-based transactions.