Fraud fears rise as cashless society nears

New findings from Osborne Clarke reveal concerns over data privacy and security are rising, despite a reduction in the use of cash across Europe.

• 81% of EU consumers worry about fraud in a cashless society – a 12 percentage point increase on the year before
• Three quarters of EU consumers (76%) worry they would share too much data if cash were to be completely replaced by mobile payments
• Fingerprint scanning favoured over traditional passwords to verify individuals’ identity

 Despite well-reported reductions in the use of cash across Europe, new research from international legal practice, Osborne Clarke, today reveals that consumers in the EU are now more concerned than they were a year ago about incidents of fraud and security breaches should mobile payments completely replace cash in the future.

Figures have shown consumers have been open to using alternative payment methods to cash for a number of years. For example, a recent survey by ING revealed that 54% of people in Europe use physical cash much less than 12 months ago while nearly a third (34%) of EU citizens said they would go completely cashless if they had the choice.

Fear of the fraudsters

New findings from Osborne Clarke, however, reveal that rising concerns over data security and privacy could hinder the reality of a completely cashless society. Eight in 10 (81%) of European consumers say they are worried about fraud should mobile payments completely replace cash – a 12 percentage point increase on the year before. 80% were also concerned over security breaches.

Commenting on the findings, Nikki Worden, Partner at Osborne Clarke, said: “For many consumers, the convenience of cashless payments has often outweighed the security risks. However, the large number of high-profile customer data breaches reported in the news has caused concerns to grow.

 “As we head towards a cashless society, more thorough security checks have to be in place to address these fears. The implementation of strong customer authentication – as required by PSD2 – will help make it harder for fraudsters and hackers to take funds from accounts that are linked to electronic devices. Businesses also need to ensure they are taking the necessary steps to properly protect consumer data and demonstrate cyber resilience in order to boost levels of consumer trust.”

Verifying identities

One of the main aims of PSD2 is to better protect customers against fraud. Under the directive (which was implemented in the UK in January 2018), from September 2019, an account holder will need to show two out of the three elements of possession (e.g. holding a payment card), knowledge (e.g. a password or PIN) and being to verify his or her identity when accessing an account and making payments (i.e. he or she will have to pass a biometric test).

Osborne Clarke’s research found that the majority of European consumers (60%) are comfortable with fingerprint scanning as a method to identify themselves on a mobile device, with respondents favouring this method of verification over traditional passwords (57%).

One in five consumers (21%) would be comfortable using voice recognition to verify their identity, with respondents in Italy and Spain being most open to this technology (both 28%). Respondents in Germany are less comfortable with this method of verification (14%).

Worden continues: “Biometric identity technologies play an important role in fighting incidents of fraud in digital payments. While some consumers are still apprehensive about voice and facial recognition, you can see how widely accepted fingerprint scanning has become since it was introduced to verify identities on smartphones. As other biometric technologies become a standard feature on connected and mobile devices, consumer acceptance will only continue to grow in this area.”

Too much information?

In addition to fears over fraud, the research also found that over three quarters of respondents (76%) are also concerned about sharing too much personal data should cashless payments become the only method of payment in the future – a 25 percentage point increase.

“The impending General Data Protection Regulation will certainly better protect individuals' personal data and increase data transparency to help curb these concerns. However, businesses also have a responsibility to bridge the knowledge gap with consumers about how their data is used. As payments methods change, banks and retailers need to anticipate the questions worried consumers will ask and have the answers ready to hand in clear FAQs."