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Social media sites have evolved significantly in recent years, but the most recent and one of the most transformative changes has been the rise in social commerce, something which has transformed the online shopping space.
Consumers, especially those on the younger end, such as millennials and Gen-z, are now favouring social media platforms for their online shopping. The giants of Facebook and Instagram garner most of this attention but TikTok, following its partnership with Shopify, is poised to dominate the younger age categories for social commerce, and demonstrates that there are opportunities aplenty.
It’s clear the days when social media was a tool for simple product promotion are gone: retailers are bridging the gap between themselves and customers by allowing the entire transaction to take place on the social media site itself. This new demand for immediate social commerce, without redirection, is fuelled by consumer demand with research showing that 71% of consumers would rather complete the sale on the social platform, than be sent across to a different retail site and payment page to check out. Consumers are eager to make immediate, impulsive purchases and retailers are even more eager to facilitate this.
Understanding the risks of social commerce
Social commerce is not without its risks, though. High-speed transactions between two independent parties with the sharing of personal banking information are vulnerable, as speeding up the buying process can weaken the security measures put in place to guard customer details. This is a major concern amongst consumers who have had to switch to almost exclusively online shopping during the global pandemic.
Further concerns relate to the authenticity of products bought or advertisements shown. According to the Anti-Counterfeiting Group (ACG), 31% of shoppers unintentionally bought fake products online in 2019, with 23% of these counterfeit goods being purchased through social media.
A healthy level of scepticism and a use of logic can go a long way to protect consumers. Products sold by disreputable retailers or unknown merchants are best avoided and applying a critical eye to accounts offering great deals can keep consumers safe - more often than not, if it seems too good to be true, it is.
The impacts of fraud
Businesses can suffer heavily from fraud with merchants devoting an average of 3-5% of their revenue on combatting the threat it poses. The cost of Card-Not-Present (CNP) fraud to retailers was $32.29 billion in 2020 with estimates expected to rise to $40.62 billion by 2027. Compensation to victims, stolen or lost inventory, insurance costs and chargeback fees can all add up to an astronomical cost for any ecommerce business.
Consumers also stand to be victims of ecommerce fraud, as businesses storing personal information are likely to be the target of cyber-attack: 65,000 attempts to hack small- to medium-sized businesses (SMBs) occur in the UK every day, around 4,500 of which are successful. Leaked data can lead to identity theft, blackmail, ransomware, as well as other forms of extortion or digital harassment. Customers who lose personal information, due to no fault of their own, will have a loss of faith in the retailer, the platform and perhaps even social commerce in general.
How open banking can boost the payment security of social commerce?
Combining security with convenience, the open banking payments offering makes social commerce safer from the impact of fraud. Payment Initiation Services (PIS) allows the transfer of money directly to the recipient through the bank's own security and verification measures. The consumer won’t have to share sensitive information on social media to take advantage of commerce, instead they can rely on the rigorous security of their bank who will process the transaction without storing any information with the social site or the merchant.
Without even leaving the page which drew their eye to a certain product, a consumer can pay a retailer seamlessly and with no concern for their sensitive information. The customer journey from interest to purchase is more streamlined than ever with the use of open banking.
The benefits of PIS are also felt by the retailer. The verification process is a defence against the ubiquitous practice of CNP fraud, saving businesses money on insurance and chargebacks when margins for profit are tight. Defence of data is also essential in making sure your digital business is in high esteem. No company can hope to be marked with distinction in a competitive marketplace if they don’t provide adequate protection for their customers, whilst safety and ease of purchase aren’t the flashiest of descriptors, they are an essential bedrock for reputation in social commerce.
A well-tailored digital platform is the lifeblood of any retailer in the digital age. Social media is where your customers are most vocal in praise and in criticism. Giving your customers a hassle-free payment experience will draw far more of the former and little of the latter, generating revenue in the short-term and cementing your reputation as a reliable service in the long run.
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