Kount has released a new research report on digital innovation and emerging fraud. Their study found that the most innovative businesses are also the ones facing the greatest fraud threats.
The study surveyed hundreds of respondents across the retail, restaurant, insurance, and financial industries. It found that over 40% of businesses say fraud impedes their expansion into new digital channels and services.
With the threat of emerging fraud and increasing expectations for a frictionless customer experience, businesses are challenged to balance revenue, expansion, and innovation priorities.
The study found that 48% of consumers are more sensitive to anti-fraud measures that disrupt their online experience than they were a year ago. This means that retailers and restaurants have an increased imperative to balance fraud mitigation and customer experience.
Yet, only 64% of organisations’ customers have confidence in the security of their digital channels. In this era of high customer expectations, increasing digital fraud risk, and competition to continuously innovate, businesses must address this critical interconnection.
Although businesses are keen to adopt new features, such as voice ordering or mobile wallets to engage their customers and provide an enhanced customer experience, they don’t adopt proper fraud prevention and detection controls.
This report underscores the fact that digital innovation and the corresponding increases in revenue in these industries will never reach their full potential without integrating suitable fraud prevention initiatives.
The retail industry has led the way in rolling out increasingly sophisticated digital innovation, but they also face the biggest risk from fraud. This is partly because many retailers don’t use adequate fraud controls in an effort to minimize friction in the customer experience.
For example, 43% of retail merchants still authenticate users with only usernames and passwords, which can leave customer accounts vulnerable to takeover. As a result, retailers report that digital fraud (34%) and account takeover (10%) are their most significant fraud threats.
Restaurants are no longer relegated to brick-and-mortar, highlighted by the fact that 70% of those surveyed report plans to invest in digital products and services within the next year.
While many are focusing on new feature expansion and user experience (UX) refinement (48%), fraud management (27%) isn’t top of mind. What’s more, only 4% of restaurants ranked managing digital fraud risk as a top challenge for digital innovation, compared to 12% of all businesses.