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Online Payments Ecosystem and the Challenges It Faces



When Amazon announced the creation of Amazon Prime in 2005, it was the turning point in a new era of consumer expectations and the online payments ecosystem. Customers could get nearly anything they wanted with one click, within two days.

Online commerce companies around the world joined the arms race to provide the most seamless transactions and the fastest service.

Customers expect eCommerce to deliver on their demands of instant, frictionless payments and immediate delivery. As payment technology evolves, it’s becoming easier than ever for online merchants to meet those demands. However, this brave new world of eCommerce is not without its challenges.

An Increasingly Cross-border Ecosystem

Online commerce is no longer confined within national borders. Consumers around the globe are being enabled by eCommerce, and that trend is only going to continue growing. With cross-border transactions comes a higher volume of cross-border fraud. Even as GDPR, PSD2, and other regulations mandate more secure transactions regionally across the globe, eCommerce companies need a multi-layered approach to verifying customer data internationally.

Poor Authorization Rates and False Declines

Card Not Present (CNP) transactions are a critical—and growing—part of the eCommerce payments landscape. Yet CNP transactions also provide one of the biggest opportunities for fraudsters. Analyst firm Juniper Research predicts that CNP fraud will cost eCommerce companies $130 billion by 2024.

Additionally, CNP transactions have higher false decline rates than Card Present transactions, resulting in disgruntled customers and lost revenue. Not only do merchants not get paid for the falsely declined transactions, but frustrated customers are likely to head to a competitor instead of trying the transaction again.

A lack of fluid data sharing between entities in the payments value chain is one factor; another is that many merchants are using older, asynchronous fraud assessment methods after the transaction rather than focusing efforts on identity verification during the pre-authorization stage.

Unknown Territory and lack of Technical Readiness

The third challenge plaguing the online payments ecosystem is simply how unprepared most eCommerce companies are to venture into unknown territory. Shifting fraud patterns keep merchants, issuers, and PSPs on their toes, while constant regulatory changes create confusion about compliance and liability.

The technology exists to meet the evolving needs of today’s online payments ecosystem, but there remains a lack of technical readiness throughout the industry.
In order to meet the needs of international customers without opening the door for fraudsters, all stakeholders in the online payments ecosystem need to stay up-to-date on best practices and address their own technical readiness.

Is your business up to the challenges of the online payments ecosystem?


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