# Open banking as a means to enhance social commerce security
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-06-14
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: The Rise of Social Commerce: Unleashing the Power of Online
Meta Description: Discover how social commerce is changing the way consumers shop online, with insights on trends, popular platforms, risks, and the importance of direct sales
URL: https://financedigest.com/open-banking-as-a-means-to-enhance-social-commerce-securityhtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/social-commerce-security-1736838282987-compressed.jpg)

_By **Leon Muis,** Chief Business Officer, Yolt Technology Services (YTS)_

The rise of social commerce has transformed the online shopping space. [Data reveals that](https://www.linnworks.com/whitepaper-access/the-effortless-economy-a-new-age-of-retail) (35%) of consumers have already made a purchase through social media. Among younger customers, its popularity is even higher, with more than half ( [51%) of millennials](https://www.bigcommerce.co.uk/blog/social-commerce/) likely to spend money in social media shops. While more established platforms like Facebook and Instagram garner the most purchases, [Tiktok’s partnership with Shopify is allowing merchants access to younger Gen-Z audiences.](https://techcrunch.com/2020/10/27/tiktok-invests-in-social-commerce-via-new-shopify-partnership/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAABh2sridSTCUpSsweeU6vRWWO3OcjZ-wLaAYutlKfRfmceOWLbXTvBVGZdwdimSclNhrSJHVOJdPfI4LDWiQC7qTOzMV-Th9ZEiYzZtHKNJIu2su49Z-RUL903c8r0u0vkuMAPV07kkgI4AXgwSO3omFphFi7FqplTfqczuYrk4F)

The ease of purchasing on social commerce sites has pulled in an eager clientele: more than [three-quarters (76%)](https://www.linnworks.com/whitepaper-access/the-effortless-economy-a-new-age-of-retail) of consumers have made impulse purchases via social channels and 82% like the convenience it offers. [A fifth of those already purchasing through social](https://www.paymentscardsandmobile.com/uk-social-commerce-set-to-double-in-the-next-six-months/) platforms do so weekly, spending an average of £71 a month.

It should be of little surprise that, with this in mind, retailers are rethinking their social media models, moving from a showcase for products to direct sales within apps and platforms. The immediacy of purchase is of critical importance in social commerce. [71% of consumers](https://www.linnworks.com/whitepaper-access/the-effortless-economy-a-new-age-of-retail) would rather complete the sale on social than be redirected across to a retail site and payment page to checkout. Removing barriers for consumers and easing the purchase is essential for [online retailers who are fighting to maintain the attention of the customers in an aggressively competitive marketplace](https://www.financedigest.com/online-marketplaces-embracing-embedded-finance-to-benefit-both-customers-and-vendors.html "Online marketplaces: embracing embedded finance to benefit both customers and vendors     ").

**Understanding the risks of social commerce**

Despite the wide use of social commerce, the practice is not without its risks. One of the biggest concerns amongst consumers is the security of their sensitive details. Wary users could be justified in thinking that a faster buying process may [open the door](https://www.financedigest.com/lack-of-electric-vans-opens-door-for-chinese-other-ev-makers.html "Lack of electric vans opens door for Chinese, other EV makers") to data breaches or personal information leaks. Digital fraud is a major concern for many as it showed an ugly increase during the pandemic: [1.1 billion](https://www.securitymagazine.com/articles/93008-1-billion-fraud-attacks-detected-since-the-beginning-of-2020) fraud attacks took place in the first half of 2020, double the volume compared to the last half of 2019.

Counterfeit goods and false advertising is another substantial concern for social commerce shoppers. According to the [Anti-Counterfeiting Group (ACG)](https://www.goodhousekeeping.com/uk/consumer-advice/consumer-rights/a34393013/social-media-shopping/), 31% of shoppers fell victim to fake products online in 2019, with 23% of these counterfeit goods being purchased through social media.

Review sites, comment sections and other forms of social proof can be helpful tools but, ultimately, consumers must approach purchasing on social marketplaces with a critical eye. People can shop on social [platforms relatively risk-free if they use their common sense and a healthy level](https://www.financedigest.com/fime-launches-the-next-generationof-its-emv-level-3-test-platform.html "FIME launches the next generationof its EMV Level 3 test platform") of scepticism. However, there are many ways that even the most astute consumer can fall prey to fraudsters, incurring cost to themselves or cost to the retailer.

![Leon Muis](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/leon-muis-e1623689744869-1736838282958-compressed.jpg)

Leon Muis

**The impacts of fraud**

The immediate impact of fraudulent transactions can have a grave impact on business and consumers alike. Costs can run high with compensation to the victim(s), shipping, [insurance costs](https://www.financedigest.com/as-the-cost-of-living-bites-tackling-insurance-quote-manipulation-is-key.html "As the cost of living bites, tackling insurance quote manipulation is key"), transaction fees, as well as chargeback fees. Replacement of ‘lost’ inventory and the manual review of suspicious transactions only add to the time and [financial costs](https://www.financedigest.com/how-much-does-cloud-based-financial-software-cost.html "How Much Does Cloud-based Financial Software Cost?") put on business by fraud cases.

Merchants can end up [spending 3-5% of their revenue](https://support.bigcommerce.com/s/article/How-Fraud-Can-Impact-your-Business#:~:text=shipping%20and%20insurance%20costs,staff%20to%20review%20suspicious%20transactions)) combatting fraud. These [costs are hard enough to bear in good times but they can become crippling during a pandemic when profit margins are tight and businesses](https://www.financedigest.com/cutting-business-costs-pros-of-using-commercial-heat-pumps-in-2016.html "Cutting business costs: Pros of using commercial heat pumps in 2016"), especially SMEs, have been hit hard.

Fraud though can have longer term [impacts than revenue loss](https://www.financedigest.com/uncover-the-impact-of-2016s-natural-catastrophe-losses.html "Uncover the impact of 2016’s natural catastrophe losses"). Customer confidence in both the business and the [social media](https://www.financedigest.com/why-no-event-should-be-planned-without-a-social-media-strategy.html "Why No Event Should Be Planned Without a Social Media Strategy") platform may be shaken. With little faith in the [protection of sensitive financial](https://www.financedigest.com/protecting-the-uk-financial-services-sector-from-cyberattacks-now-and-in-2023.html "Protecting the UK financial services sector from cyberattacks now and in 2023") details, even the most avid supporter of a company will look elsewhere.  At a higher level, reputational damage may discourage potential investors, especially when huge headline-grabbing cyberattack cases reach news outlets.

Fraud crises weaken all aspects of [social media](https://www.financedigest.com/ai-and-social-media-are-revolutionizing-personal-finance-in-2023.html "AI and Social Media Are Revolutionizing Personal Finance in 2023") purchases reliant on good faith and trust. [Commercial relationships between social media platforms and retailers](https://www.financedigest.com/iveco-to-transfer-nordic-retail-and-commercial-operations-to-hedin.html "Iveco to transfer Nordic retail and commercial operations to Hedin") will be heavily strained if consumer faith is weakened in both to an unhealthy extent.

**How [open banking](https://www.financedigest.com/open-data-represents-the-biggest-challenge-to-banks-in-a-generation.html "Open data represents the biggest challenge to banks in a generation") can boost the payment security of social commerce?**

[Open banking](https://www.financedigest.com/how-will-open-banking-impact-the-customer-experience.html "How will Open Banking impact the customer experience?") payments (Payment Initiation Services) help to resolve the risks and challenges of social commerce, since they can provide a considerable boost to payment security.

This method allows social [commerce payments to be verified by the customer directly through their bank’s](https://www.financedigest.com/how-conversational-commerce-can-help-banks-engage-with-millennials.html "How conversational commerce can help banks engage with Millennials") own security measures. [Customers can purchase products on social media](https://www.financedigest.com/10-tips-to-help-with-your-social-media-customer-care.html "10 TIPS TO HELP WITH YOUR SOCIAL MEDIA CUSTOMER CARE") platforms without entering their sensitive financial information.

This means that there is an additional layer of security for [social media](https://www.financedigest.com/saudi-snitching-app-turns-citizens-into-social-media-police.html "Saudi snitching app turns citizens into social media police") shoppers. The payment process is verified through the same organisation they entrust their savings to, creating a faith in the [security of their social](https://www.financedigest.com/31972social-engineering-in-the-financial-services-people-are-the-weakest-link-in-the-security-chain.html "Social engineering in the Financial Services : People Are The  Weakest Link in the Security Chain") media transactions. The ease of [payment for social media is now married with security](https://www.financedigest.com/allpay-signs-with-eckoh-to-secure-telephone-payments.html "allpay signs with Eckoh to secure telephone payments") verification, presenting no barriers to the customer journey and ensuring a fast conversion to payment for many.

Verification is also a valuable tool for combatting [fraud and helping business](https://www.financedigest.com/why-your-business-is-vulnerable-to-supplier-fraud.html "Why Your Business is Vulnerable to Supplier Fraud") growth. Potential acts of fraud are identified quickly and snubbed out, saving retailer costs on insurance and chargebacks. A reliable, preventative transaction security system will reassure customers, [allowing them to shop](https://www.financedigest.com/some-in-shanghai-allowed-out-to-shop-end-of-covid-lockdown-in-sight.html "Some in Shanghai allowed out to shop; end of COVID lockdown in sight") without the threat of increased exposure to potential fraud.

Social commerce is growing and will continue to be a vital asset for retailers. It is important to remember that social media can be a double-edged sword. If [customers have a bad experience](https://www.financedigest.com/how-partnerships-fuel-fintech-innovation-and-help-banks-deliver-a-better-customer-experience.html "How Partnerships Fuel Fintech Innovation and Help Banks Deliver a Better Customer Experience") with purchase safety, they’re likely to vocalise it, attempt to discourage others from using the service and will never return.

Give them a great payment experience, however, and they will most likely talk about it with their peers within their social media networks – increasing sales as a result.


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---