As consumers shift their spending to digital channels, their payment behavior changes as well, making “credential-on-file” (CoF) payments increasingly ubiquitous.

CoF payments refer to payments made using a funding method that the customer has stored for current and future digital transactions (as opposed to “Form Fill payments” which refers to consumers actively selecting the payment method and entering their payment and address details on every transaction).

For merchants, CoF payments provide their customers with a more seamless payment experience, reducing shopping cart abandonment which is especially relevant for mobile transactions. At the same time, storing payment credentials on file presents its own unique set of security and fraud challenges.

For issuers, higher online and mobile conversion rates should translate to increased payment volume transacted on their cards, but it opens up a new avenue for intense jockeying over top of wallet status. For consumers, CoF payments remove friction from the online buying experience, potentially further accelerating the shift from in-store to online commerce, though concerns about the security of their payment credentials remain an important concern.

It is important for issuers to maintain their top of wallet position in cardholders’ digital wallets once they have established it, given the stickiness of the top of wallet card (for example, 77% of Android Pay, Apple Pay, and Samsung Pay purchases were made using the default card in December 2016, an increase from 70% in May 2016). According to Deloitte, the main reason (over 40%) cited for changing a default payment card was card expiration.

Security concerns also play a significant role in consumers deciding to establish a Card-on-File as the default payment method. According to Deloitte, 38% of respondents removed a card because they lost trust in the website or app in which the card was stored, or they experienced fraudulent activity while paying with the card.