E-Commerce Growth Remains Strong with Merchants Outsourcing Payment Processing, Fraud & Hosting Services

David Johnson
Senior Vice President, Emerging Commerce Products
Posted on August 31, 2017

It should not come as a big surprise that over fifty percent of consumers have stated they prefer shopping online instead of in stores – a figure that jumps to sixty-seven percent for millennials. The trend demands that retailers fully embrace digital commerce to thrive. Although many traditional brick and mortar stores are struggling with even a few disappearing, in-store shopping will absolutely continue for many years to come. In fact, e-commerce only represents fifteen percent of retail sales in the US. Many online-only retailers have actually moved the other way, opening up pioneering stores. Clearly, a more nuanced approach is needed.

The new model for online shopping combines intelligent technologies, hyper-personalization, seamless cross-channel engagement, vigilant security measures and the flexible payment options to match customer expectations. To combat complexity, merchants are realizing that managing their own e-Commerce infrastructure is not always the rational response, and are increasingly looking to specialists to resolve payment processing and security issues.

Anytime, Anywhere Commerce

The e-Commerce trends reflect the broader retail industry imperative around omnichannel service delivery, which calls for merchants to provide customers a seamless experience, whether shopping on a computer, mobile device or at a retail store.

To make that happen, payment flexibility is key. Processing flexibility is complex, the inherent need to deliver enterprise level availability requires a robust, highly reliable and secure processing platform that supports all major payment methods with no currency limitations. Debit, prepaid card processing, and least cost routing –along with the ability to accept PIN-less debit transactions – are vital to a complementary online service. Add contactless, mobile-wallet and alternative mechanisms like Apple Pay and PayPal, it is clear a strong and flexible acceptance strategy is central to success. The ongoing growth in mobile devices in the retail experience compounds the issues for merchants.

The Digital Fraud Frontline

Retailers have spent the last few years struggling with EMV migration. As the process nears completion, fraudsters have quickly migrated to e-Commerce and digital channels. Last year, Forbes estimated that almost two-thirds of all retail fraud will be through online channels. Ironically, it is the move to EMV driving this; as card present fraud becomes tougher, weaknesses in the online world become easier to attack.

As mobile phones become customers’ preferred e-Commerce channel – currently just under fifty percent of e-Commerce is conducted on smartphones. This increased phone usage combined with the growing shift to digital channels requires a new level of diligence when accepting payment. Consequently, merchants are enthusiastically embracing the digital realm while retaining flexible payment options and deliver the security customers expect from their trusted retailers.

Techniques such as tokenization – where card numbers are rendered to all but the authorized parties – are increasingly central to secure transactions. But other techniques are also required to provide early warning on potentially fraudulent transactions while minimizing the risk of declining a good transaction. The use of external information sources can be incorporated into the validation process, providing real-time data to evaluate individual transactions on a case-by-case basis. Spotting the fraud early through sophisticated rule engines, hierarchical risk strategies, and increased use of AI and e-learning techniques combine to combat the growth in online fraud.

Partner Up

Increasingly, merchants of all sizes, whether multinational brands or small niche retailers are looking to specialist providers to resolve, manage and (in many cases) operate and host their e-Commerce infrastructure. Flexibility is paramount to merchants and therefore a hosted service offers unparalleled options and payment processor connectivity. This can remove much of the headache from operating an e-Commerce storefront.

E-Commerce is no longer a nice-to-have, additional service on the website. It offers a unique combination of fast-growth and low market share, which results in an enormous opportunity for the sector to grow for both new players and industry leaders. Fortunately, retailers of all sizes can get the appropriate solution to match their needs and budget. E-Commerce continues to represent a critical sales strategy that must adapt and evolve, with success coming from a consistent focus on customers, technology, and partners.

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David Johnson
Senior Vice President, Emerging Commerce Products

DJ is the Product Division Lead over Loyalty, Prepaid, EBT – Government and Merchant Products. DJ joined FIS in 2007 and has over 20 years of payment industry experience with roles in product development, strategy, consulting and business development. Before FIS, DJ managed Online Banking and Bill Pay for a Top 15 US bank. DJ earned his MBA from Emory University and a degree in Finance from the University of Florida.