Data: Fraud’s toll on consumer trust

The hacks keep coming — most recently to Facebook and the federal government’s health insurance sites — and consumer trust in online security systems disintegrates along with them, according to a number of recent surveys. During the first half of this year, 3.2 billion consumer files were compromised worldwide, up 72 percent over last year, according to Gemalto. The effect on consumers is a growing sense of mistrust, casting shadows on the payments industry.

Biometrics and multi-factor authentication tools will eventually replace passwords — California this month passed legislation banning weak default passwords for companies manufacturing internet-connected devices after 2020. But broad new approaches are still a few years away, experts say. Here’s a look at where consumers’ faith in security methods is fraying fastest and the surprising areas where it’s growing.

A barrage of major data breaches has made consumers nervous about online fraud risk. In its first survey weighing attitudes about fraud, Featurespace found that a whopping 62 percent of consumers believe their fraud risk is higher today than it was two years ago. The data points to the direct and indirect threats bank and retail customers experience from high-profile breaches.

Asked which fraud scenarios they fear, 37 percent of consumers predicted they’ll become online fraud victims over the next year. About the same amount, 36 percent, said they don’t expect to experience either online fraud or physical theft over the next year. Twenty-two percent feel their odds of experiencing either online fraud or physical theft are about equal, while 7 percent think they’ll likely be a victim of physical theft within the next year. Featurespace, which offers payment fraud solutions, conducted its survey among 1,112 U.S. adults in September 2018.
Despite rising fear about online fraud, 20 percent of consumers admit to re-using their bank account password on other sites to access email, social media networks and other apps. Criminals are leveraging information gathered from data breaches to access consumer accounts directly and via phishing schemes, according to fraud analysts, so it’s clear there’s a connection between porous passwords and rising bank and e-commerce fraud rates.

Financial services providers and merchants continually exhort consumers to be disciplined about password security, and increasingly they force stepped-up authentication for accessing accounts. Paradoxically, this appears to be contributing to a growing sense of consumer frustration and apathy.
Many consumers are dropping their end of the security bargain, according to a new survey by Janrain, a Portland, Ore.-based firm specializing in customer identity and access management. Janrain sought to measure how ongoing data breaches have affected consumer trust in brands and their security practices.

Sixty-one percent of consumers claim to be vigilant about protecting their computer and mobile security, but 38 have given up on being careful. Fifteen percent gave up because they don’t have time to manage different passwords, 12 percent believe hackers can break into company networks anyway and 11 percent gave up for other reasons. Janrain conducted its survey among 1,097 consumers in August 2018.
While consumers exhibit a growing mistrust and disinterest in online security processes, banks and credit unions remain the most trusted of all types of providers for financial services activities, including P2P transfers. Confidence declines when other types of companies start moving consumers' money around, according to a recent Fiserv survey. Eighty-seven percent are comfortable with banks and credit unions transferring funds to others, while only 60 percent trust a money-movement company like PayPal or Western Union with a P2P transfer.

About half of consumers trust big technology companies like Apple or Google with transferring funds to others, while 40 percent of consumers say they'd trust a financial software company like Mint or Intuit with transferring money to someone else.

Retailers garner trust for P2P transfers from 34 percent of consumers, while social media companies rank at the bottom. Only 18 percent of consumers would trust a social media network like Twitter or LinkedIn to move funds to someone else, Fiserv said. Fiserv conducted its study in conjunction with The Harris Poll among 3,050 U.S. adults between Feb. 26 and March 15, 2018.
The fact that half of consumers don’t trust big-tech companies like Apple and Google to transfer funds isn’t a great vote of confidence for Apple or Google's P2P services. But surprisingly, these nontraditional companies gained significant yardage in trust for P2P over the last year, according to Fiserv.

Last year only 38 percent of consumers would trust a technology company to transfer funds to someone else, but 52 percent would do so this year.

Across the board, consumers over the last year expanded their trust in big-tech companies for handling key financial maneuvers. Fifty-five percent of consumers this year would trust the tech giants for bill payment, versus 40 percent in 2017. Thirty-nine percent feel comfortable about getting a loan from the big-tech companies this year, versus 29 percent last year.

Consumers still put the most faith in banks and credit unions for critical transactions like transferring funds to other people, but mainstream financial services providers should keep an eye on the fact that consumers are feeling more confident allowing nontraditional providers to handle their money at a time when doubts about traditional security processes are high.