When compiling “Fraud Management in Online Transactions,” a collaboration with Nuvei, PYMNTS Intelligence found that 82% of U.S. eCommerce merchants with international sales suffered cyber or data breaches last year, which — for 47% of them — resulted in both lost customers and revenue. In fact, 68% of eCommerce merchants told us that balancing security needs with the need to keep customers satisfied has proven to be a challenge.
Consequently, 95% of the merchants we surveyed told us they have either already enhanced the their anti-fraud capabilities or they are planning to do so soon.
In completing “Fraud Management in Online Transactions,” we examined 10 widely-used popular fraud prevention tools and found that two-factor authentication (2FA) — in which shoppers must authenticate each checkout, often with a code sent to their phones — is not only the most effective anti-fraud method but also the one that delivers the lowest rates of failed payments.
Not all 2FA technologies are the same, however. The tool comes in two flavors: per-transaction 2FA and at-login 2FA, with the former appearing to be far more effective.
Among those using per-transaction 2FA, 43% say it’s their most effective security method.
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Per-transaction 2FA is not only effective in fighting fraud prevention, it’s also the most effective measure for minimizing failed transactions. Merchants implementing 2FA for each transaction reported a failed payments rate of just 10.3% — the lowest among the 10 security methods we measured. As the chart illustrates, even highly effective transaction confirmation notifications have a slightly higher failed payments rate of 10.8%.
However, only 22% of merchants using at-login 2FA say it’s their most effective method, suggesting there is a greater efficacy in per-transaction 2FA, especially since it enables users to remain signed in across multiple sessions.
Despite its popularity and effectiveness, only 53% of merchants now use per-transaction 2FA. Although it is the third-most common security method, nearly half of eCommerce businesses are not yet benefiting from it. Merchants seeking a more secure way to do business should follow the data, which indicates that per-transaction 2FA has proven itself to be both a valuable tool in reducing fraud and an effective way to boost customer satisfaction.
