Growing Online Payments Fraud Puts Retailer Data Security in the Spotlight

PYMNTS asked business leaders for their take on how to plan for the rest of 2023 and what they are telling their teams to focus on. Mario Shiliashki, Global Payments CEO at PayU, says retail will likely face another challenging year. Merchants must collaborate closely with their payments partners to enhance security, meet changing customer preferences, and capitalize on innovative payment rails.

It has become clear that 2023 will be a muted year for consumer retail. While some merchants have presented higher-than-anticipated earnings, the same message continues to resonate with the majority: expect slower sales growth over the coming months. The global economic downturn has impacted the wider technology industry, and payment providers are not exempt. At PayU, we have made strategic decisions about where to focus our energies — and were unanimous that this should further strengthen and innovate our core offering.

While payments providers will have to adapt to another roller-coaster year, there are also numerous opportunities for them to support merchants and increase revenues —from local businesses to global brands — and eCommerce is a bright spot on this horizon. How can merchants capitalize on this online migration, and how can payments partners support them?

Security at the Core

First, the payments sector will continue its path toward total digitization. This must be done with security at the core. Research has found that cumulative global merchant losses to online payment fraud between 2023 and 2027 will exceed $343 billion .

With many retailers now taking an omnichannel approach, it is critical that they are equipped with reliable fraud prevention and monitoring tools and up-to-date security protocols, such as network tokenization, PCI and 3DS.

Emerging technologies, such as machine learning and artificial intelligence (AI), will also play a key role in fraud detection and prevention. AI-based algorithms can identify and flag true anomalies. This means they can distinguish between genuine and fraudulent transactions far more accurately than rule-based systems, generating fewer false positives.

Regulation is also changing; 2023 will also be a key year for merchants to work with their payments providers to ensure they are ready for the looming PCI DSS v4.0 deadline.

Enhanced Payment Rails

Second, as merchants see cross-border eCommerce grow and as consumer retail continues to globalize, the need for fast, secure and reliable international payments will grow. Critically, these must not result in lost revenue from inefficient currency conversion. Key to this is the creation of payment rails that effectively meet the demands of modern merchants. New business models, coupled with innovative payment rails, can enable less expensive and more efficient cross-border payments, addressing the industry need for delivering funds efficiently.

Meeting Changing Preferences

Finally, demand for checkout finance — largely buy now, pay later (BNPL) options — has also continued to rise this year. While the cost-of-living crisis has stimulated this growth, it’s now reported that older people with higher incomes are the fastest-growing group of users of deferred payment schemes.

With new regulations incoming, merchants must be able to depend on fully compliant payment partners. I believe that retail finance (if provided responsibly and ethically) can be a powerful tool for financial inclusion and support merchants with increased sales, higher transaction values, reduced cart abandonment and access to new customers. In short, innovative lending schemes should be encouraged, providing that they are responsible and transparent to protect consumers from bottomless debt pits. For this reason, payment partners must work with merchants to demonstrate that they’re ethically sound, compliant and solving a genuine customer need.