What are the risks associated with different payment methods?

Kirstie Lau6 minutes
Business tipsFinance
What are the risks associated with different payment methods?
In this article

The advancement of global eCommerce has driven businesses to expand across borders. As companies venture into new territories and incorporate online payments, accepting local methods of payments becomes vital for attracting new customers, enhancing user experience, and increasing conversion rates. Yet, the associated risks of accepting payments online must be carefully managed.

This article explores the risks different traditional and online payment methods have and how to mitigate them effectively. By the end, you'll have a clearer understanding of payment method risks and how to minimise their impact on your payments. 

An overview of payment methods

Although payment methods vary by country and region, most fall into a few common categories. 

Traditional payment methods, such as bank transfers and credit card payments, remain prevalent. According to Allied Market Research, the value of the global credit card payments market reached US$524.9 billion in 2022, and is projected to surge to US$1.2 trillion by 2032. 

Digital and online payment methods are also gaining significant momentum. Statista forecasts that digital wallets will lead eCommerce payments by 2026, with a projected global usage of 54%. Digital payments, such as mobile wallets like Apple Pay and Google Pay are becoming essential due to their convenience and worldwide accessibility.

Optimising the payment process is a key focus when accepting payments globally. It is essential to provide payment methods that allow you to cater to wherever your customer may be. Neglecting to offer an easy way for your customer to pay you may result in missed revenue opportunities. However, these payment methods vary in popularity and carry associated risks.

Common payment methods in Hong Kong and their risks

Here's a breakdown of the risks associated with common payment methods in Hong Kong.

Bank transfers

Direct bank transfers are generally secure. However, concerns arise regarding the potential for errors during the transfer process. This could translate to delays and errors that can impact your cash flow management and cause inconvenience to other aspects of your business. 

Credit cards

While credit card transactions are commonplace and major payment schemes like Visa, Mastercard and American Express are widely accepted, accepting credit card payments can pose several risks, including the threat of credit card fraud, and chargebacks.

Debit cards

Similarly, debit card transactions are not excluded from fraud. In fact, debit cards can sometimes be even more vulnerable to fraud than credit cards. Account monitoring isn’t as thorough as credit cards so the likelihood of identity theft is higher when accepting payments via debit cards. 

Digital wallets and mobile payments

Digital wallets and mobile payments such as FPS, Alipay and Alipay HK, and WeChat Pay have gained popularity because of how effortless it is to pay. Biometric authentication happens almost instantly in the form of either a fingerprint or facial recognition. However, this convenience also makes it susceptible to fraud, and device-related vulnerabilities.

Buy now, pay later (BNPL)

Similar to digital wallets and mobile payments, BNPL is also susceptible to identity theft. As most BNPL providers offer to cover large payments with minimal customer information, it can leave the door open to less scrupulous customers who can claim they’re victims of identity theft. However, BNPL’s flexible payment options have gained popularity over the last few years. According to BNPL provider Klarna, offering BNPL as a checkout payment method can boost the conversion rate by 45% and can lead to a 40% higher Average Order Value (AOV).

Security versus convenience: risks associated with various payment methods

When comparing the risks of accepting payment methods, it becomes clear that some prioritise security while others lean towards the buyer's convenience. Here's a summary:

Payment method Level of security risk Level of convenience to customer
Bank transfer Low Low
Credit cards Medium High
Debit cards Medium High
Digital wallets and mobile payments Low High
Buy now, pay later (BNPL) High High

It is apparent that businesses must embrace online payment methods. This shift adds complexity especially when collecting payments from customers in different locales in different markets. With some safety catches initiated by payment schemes, and payment solutions in place, businesses can rest easy when collecting payments online. Here are some ways to overcome risks associated with online payment methods in Hong Kong:

1. Protect sensitive data with network tokenisation

Network tokenisation replaces sensitive credit card and debit card payment data with unique tokens, reducing the risk of data breaches and unauthorised access. This technique renders data useless when intercepted, preventing fraudsters from obtaining sensitive information. For more on how tokenisation works on Airwallex, read more here.

2. Reduce chargebacks with pre-chargeback programs

Pre-chargeback programs help merchants resolve disputes before they become chargebacks. Chargebacks carry hefty fees, often favour shoppers in disputes and require manual effort to resolve. Pre-chargeback programs help address these challenges by mostly refunding disputed transactions at a reduced cost compared to a standard chargeback process.

3. Meet your compliance requirements 

Payment industry requirements, such as PCI DSS (Payment Card Industry Data Security Standard) will require you to meet rigorous security requirements for handling credit card information. In addition to PCI DSS, there are other industry standards and regional regulations that companies handling payments should be aware of. Some payment solutions like Airwallex can handle PCI requirements up on your behalf. 

4. Prevent fraud by implementing 3D Secure

3D Secure (3DS) is a security protocol that requires customers to complete an additional authentication step when attempting an online card payment, such as a one-time password sent to their mobile phone, or biometric data like a fingerprint or facial recognition. This helps to ensure that the person making the purchase is the legitimate cardholder. 

Now that you understand the risks and the counterbalances you need to put in place for your global businesses to accept payments securely while minimising fraud, chargebacks, and disputes, you may be wondering how you would be able to alleviate the complexity of building and maintaining your payment acceptance capabilities.

Global business needs: Scalability and security

As your business grows across markets, you need a payment acceptance solution that is able to scale with you and can get up and running in minutes. Designed with a global-first mindset, Airwallex holds 60+ financial licences in territories across the world. This means compliant, secure, and seamless payment acceptance no matter where your customers are based. You can localise your checkout with 160+ local online payment methods in Hong Kong including Apple Pay, Google Pay, Alipay, WeChat Pay and Klarna.

Airwallex employs best-in-class security technology to keep your business and customers safe, including network tokenisation and 3DS 2. Airwallex’s machine learning-powered optimisation engine includes automatic retries, ISO message optimisations, and pre-chargeback programs to help you improve payment acceptance rates and minimise the cost of payment disputes. 3DS 2 is the latest 3DS version designed to enhance security in online purchases while providing frictionless checkouts if shoppers are considered low risk by the card issuer.

With Airwallex, businesses can also choose to securely manage funds in your multi-currency account for future payments to local suppliers in the chosen currency. This means you can eliminate FX fees and transaction fees since you’ll be making payments to local suppliers with your currency balances. 

Learn more about how you can accept payments from customers around the world via their preferred online payment methods and how you can easily integrate with popular eCommerce platforms here.

Open a global multi-currency account for free in Hong Kong

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Kirstie Lau
Senior Associate, Growth Marketing

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