Brian noted one of her comments that “the biggest worry for the growth of Visa is not MasterCard, American Express, the ACH, or any other payment system; it is the continued confidence of consumers and merchants in the security of the system, which has obviously been shaken by recent breaches.”
Now since so much of our work with various clients is on security, and using risk analysis to balance the cost of countermeasures with the benefits to security, this set me thinking. When it comes to benefits, it can be quite difficult to quantify factors such as consumer confidence. Frankly, I think that this means it can often be sidelined when calculating the cost of security failures. If bank X cards are compromised, do people switch to bank Y? Do they switch away from cards? Do they keep their cards but use them less? I’d be curious to see what perspectives people have on this from different regions.
People are moving away from credit cards on the web, but is that because of security or because it’s a bit of a pain to have to type in your name, address, card number when you want to buy something? According to Celent, credit cards in the U.S. are losing e-commerce market share. They now account for 58% of online sales, down from 96% in 1999, and by 2009 that share will have “dwindled” to just 48.4%. (Note that credit cards continue to make gains in the U.S. economy as a whole. They account for 26% of all transactions, up from 22% in 2000.)
But I wonder if the confidence factor should be given greater weight? As a consumer, faced with story after story in press about the insecurity of payment cards, what is my rational course? It seems to me that they will continue to use cards exactly as before: cards are more secure than pockets full of cash and there’s no real alternative e-payment system (this may be changing because of what’s happening on the mobile side), and they must also be thinking that if someone counterfeits their credit cards, it’s not their problem since the bank will give them their money back. I know that when I use Paypal rather than a credit card, it’s primarily because of convenience.
Incidentally, if you’re interested in risk analysis as a topic, we produced a booklet on the subject for the Institute of Chartered Accountants. You can download it as a PDF…