Mobile Payments: Where There’s Money, There’s Fraud
It’s been a long time coming, but it looks like mobile payments are finally going mainstream. In the U.S., mobile payment transactions have risen from $32 billion in 2013 to $52 billion in 2014 and are expected to hit the $67 billion mark this year. With big names involved such as Starbucks and Apple, consumer adoption will continue to grow, as will the value of transactions.
However, not all is rosy in the world of mobile payments. Unfortunately, wherever there’s money to be made, you can count on fraudsters to beat a path in that direction. A report recently released by CardNotPresent.com makes this point very clear. Among the report’s findings was that over 60 percent of merchants are unable to determine the type of device used for a card-not-present transaction. In other words, nearly two-thirds of merchants surveyed can’t identify when a mobile device has been used to make a purchase.
One of the most surprising statistics from this report is that an increasing number of merchants believe that mobile commerce (m-commerce) is just as or less risky than traditional eCommerce – rising from 50 percent of those surveyed in 2013 to nearly 60 percent in 2014. percent indicated that they were planning to add mobile point-of-sale systems; 27 percent were planning to add mobile shopping apps, and 18 percent were planning to create dedicated mobile websites. And, even more shocking, approximately one-third of merchants had no plans to add any tools or services to combat mobile payment fraud.
“As barriers to mobile adoption continue to fall and mobile payments of all kinds surge, a green field is emerging for fraudsters,” said Steven Casco, CEO of CardNotPresent.com and the CNP Expo. “What was once not worth their time is becoming very lucrative and companies throughout the e- and m-commerce ecosystem are just beginning to understand how vulnerable they actually are.”
In another study released by LexisNexis Risk Solutions earlier this year, it was revealed that while mobile payments accounted for only 14 percent of all transactions for merchants accepting them, they made up 21 percent of the total number of fraud cases.
“We certainly see a surge in mobile payment attacks,” said Tomer Barel, chief risk officer at PayPal. “There are many more avenues for fraudsters to try.”
The cost of mobile payment fraud now ranks among the highest of all types at $3.34 for every dollar of fraud incurred. It’s especially costly, not only due to the cost of the goods lost, but also because of the associated investigation necessary. Merchants are struggling to keep up with fraudsters due to a lack of adequate tools and training.
What can merchants do to fight mobile payment fraud?
Differentiate between mobile and online fraud
Unfortunately, financial institutions typically perceive mobile and online fraud as the same, since they both originate from card-not-present transactions. However, the risks involved with m-commerce are currently considerably greater than for eCommerce, as there is a present lack of awareness and ability to fight mobile fraud.
Target mobile fraud when implementing anti-fraud solutions
Mobile fraud is distinctly different from online fraud in the sense that by definition, it is inherently more difficult to track mobile fraudsters because they are typically on the move. Online fraud more often occurs from fixed locations and Internet addresses that are easier to trace and detect. Using tactics such as geolocation and device identification to target mobile fraud can be particularly effective methods, but most m-commerce merchants fail to consider using them.
Ensure the business has the right fraud prevention strategy
When determining how to prevent fraud, it’s important to be aware of the key sources. For example, m-commerce merchants usually suffer most of their losses from international fraud. Businesses should select anti-fraud solutions that are best-suited to combat the specific type of fraud that they are facing.
Let “good guys” in and keep “bad guys” out with identity verification
In order to effectively curb losses from mobile payment fraud, merchants need a solution that quickly weeds out the fraudsters while allowing real customers to transact without hassle or fuss. A WorldPay survey revealed that 21 percent of online shoppers abandoned their carts because the process was taking too long and 18 percent due to excessive payment security checks. CyberSource also found that 19 percent of orders rejected by a major U.S. eCommerce brand were legitimate. Businesses need to ensure that they can quickly and reliably verify the identities of cross-border shoppers to prevent losses not only from fraud, but also from frustrated shoppers and false positives.
Trulioo’s online identity verification (IDV) service, GlobalGateway, enables businesses to instantly verify more than 3 billion identities worldwide. Merchants that use GlobalGateway can also check against international watchlists to avoid exposure to dealings with high-risk individuals or groups involved in money laundering or terrorism. IDV not only reduces fraud but also builds trust and confidence among your customers when they know that your business is using a reliable and trustworthy solution.
Check out our resources page to learn more about how GlobalGateway can help your business protect against mobile fraud.