The great payments paradox: Overcoming information asymmetry
In a world where fraudsters continue to innovate, there's a need for a systematic approach that helps all the actors involved in payment processing combat fraud without blocking good transactions.
Information is at the core of payment processing. Merchants, risk systems, acquirers, authentication engines, and Payment Service Providers (PSPs) all attempt to evaluate and mitigate the risk associated with a payment. If the available information isn’t sufficient, any party in the chain can block a transaction based on their internal decisioning logic. And all these parties make that decision based on limited information.
This has real consequences on conversion. Our data shows that up to 9% of customers are unable to pay during checkout because their transaction isn’t accepted somewhere along the chain. On top of this missed revenue, merchants can face unexpected high costs – up to 3% of their revenue – because of fraudulent transactions.
The payments industry has tried to diminish the underlying information asymmetry, resulting in the introduction of effective technology such as network tokens, 3DS2, and digital wallets.
And while parties along the payment chain are trying to close the gap, there is a larger opportunity to build a better payments ecosystem.