Rethinking your fears about using a credit card online
One of the biggest factors limiting the growth of online shopping in South Africa is the fear among consumers that they will open themselves up to credit card fraud, and retailers that offer other payment methods are being rewarded with instant sales surges.
But in choosing to pay by, for example, electronic funds transfer, you sacrifice one of the biggest benefits of using a credit card — chargeback.
Chargeback is a bank-initiated refund for a credit card purchase if you do not get what you paid for, either in full or in part.
Instead of having to fight with the retailer for a refund, you log a chargeback dispute with the bank which issued your credit card. Provided you can substantiate your claim, it's an effective way to get your money back from unscrupulous or inept online retailers, fraudsters, hackers or from unauthorised purchases.
The efficacy of chargeback was evident a few years ago when consumers who used their credit cards were refunded for plane tickets issued by airlines which closed down without warning — Nationwide, 1Time and Velvet Sky.
How to check if an online shopping site is secure:
- Look out for a small padlock symbol in the address bar - or elsewhere in your browser window
- A web address beginning with https:// (the 's' stands for 'secure').
- And google the site, checking for a pattern of negative reports.
The only recourse available to those who paid in other ways was to join the collapsed airlines' long list of creditors in the hope of getting a minuscule refund.
Online retail sales exceeded 1% of total retail sales in South Africa last year and have been growing at a rate of more than 20% a year since the turn of the century.
Arthur Goldstuck, MD of World Wide Worx, which conducts regular online retail surveys, says: "While 1% represents a very small proportion of overall retail, it is also a psychological barrier for investment in e-commerce initiatives by physical retailers."
The company predicts that online sales will have roughly doubled by 2020.
Much of that growth will be as a result of an increase in the number of South African internet users who are willing to transact online, rather than because the retailers have managed to persuade shoppers to spend more online, Goldstuck says.
South African e-commerce is relatively conventional, he says, failing to find innovative ways to compel consumers to "click" with the concept of online shopping.
When TFG (formerly The Foschini Group) recently asked its customers what they wanted in an online shopping site, a quarter said EFTs.
Now 34% of all online purchases for Foschini products are paid for by EFTs.
Robyn Cooke, the head of TFG's e-commerce, says: "EFT is the most popular payment choice after our store account card."
Credit cards are less popular, for two reasons: the lack of access to credit cards by the mass middle market; and a reluctance to use credit cards online.
"Even higher LSM customers prefer to use a stand-alone credit product or EFT when shopping online, as a perceived security precaution," Cooke says.
According to a recent survey by Ipsos, 67% of those who did not shop online were worried about security — despite the protection of the chargeback system and the 3D Secure, or 3 Domain Security, standard for MasterCard and Visa.
John Conlon, the head of digital at Visa Performance Solutions, who recently conducted workshops with a few dozen South African retailers about online retail innovation, urged retailers to educate consumers about how to recognise whether a site was secure, and what the benefits were of using a credit card online.