The digital payments arena is undergoing rapid change, owing to a combination of factors. Transactions are growing rapidly year-on-year as convenience improves, and regulatory changes help to drive adoption. Meanwhile, the scope of different payment types is increasing.
Traditionally, payments were made via Card Not Present (CNP) transactions, or through digital wallets such as PayPal. Presently, the wallet landscape has expanded dramatically since the early days of PayPal, while new pay-by-bank schemes such as SCT Inst in the EU, or Zelle in the U.S. market have created more choice for consumers.
Additionally, the banking world is becoming more open -- an API-driven world has created banking-as-a-service opportunities and enabled new financial service firms to enter the market as a result.
Digital Payments Market Development
According to the latest worldwide market study by Juniper Research, retailers across the globe are now forecast to lose $130 billion in digital CNP fraud between 2018 and 2023.
The study findings highlight that increasingly complex approaches by fraudsters, alongside retailers’ inertia in adapting to new fraud prevention requirements, would be key factors behind the increases in fraud transaction value.
Juniper's analyst claimed that as cybercriminals seek to monetize their knowledge to a wider, less tech-savvy audience, complex cross-channel fraud will become the ‘new normal’, with retailers ill-prepared to fight it.
Established point-of-sale (POS) vendors such as Verifone and Ingenico will therefore increasingly look to mPOS as an area for future growth, expanding their market reach to previously unaddressed markets.
"A layered Fraud Detection and Prevention (FDP) solution naturally helps to directly stop fraud, but it also offers major gains in terms of recovering potentially lost revenue through false positives. This is something about which retailers remain under-educated, and has allowed fraudsters to capitalize on relatively low FDP spend," said Steffen Sorrell, principal analyst at Juniper Research.
Outlook for FDP Applications Growth
Juniper found that the current retailer perception of FDP return on investment is hampering global FDP solutions spending. Juniper anticipates that digital payment companies will spend $9.6 billion annually on FDP solutions in 2023, although the bulk of growth over the forecast period is likely to be driven by financial institutions and payment service providers.
This situation is due to awareness of FDP benefits, as well as a requirement to deal with complex challenges such as open banking systems and instant payment mechanisms.