99 Problems and Mobile Fraud’s Number One
Boise, Idaho; Newburyport, Mass.; and Sarasota, Fla. – April 20, 2016 – Despite mobile fraud growing by 81 percent between 2011 and 2015, nearly four out of ten merchants (38.5%) say their biggest challenge managing fraud risk in the mobile channel is figuring out if they even have a mobile fraud problem in the first place. According to the latest data from the 2016 Mobile Payments & Fraud Survey, the majority of merchants are overwhelmingly incorporating mobile payment options into their online and mobile commerce strategies. But, they are unaware of the type of risks these new technologies bring – let alone what they even look like.
“Despite awareness that the mobile channel poses a greater risk than standard eCommerce, businesses are taking a blanketed approach to their security strategies,” said Don Bush, vice president of marketing at Kount. “Security is an essential part of the consumer experience. And, as we saw with the rampant spread of data breaches, if organizations don’t have a tailored strategy to manage fraud as it evolves, they, and their customers, will be paying for it for years to come.”
As organizations small and large have embraced mobile at similar rates, their focus has remained on finding ways to adapt to mobile that offer more convenience to their targeted audiences, dedicating resources to expanding mobile offerings but sacrificing security in the meantime. Instead, they’re relying on traditional eCommerce protection tools to manage risk in the mobile channel, even when nearly half (41%) acknowledge that mCommerce is riskier.
Other findings from the report take a look at the surprising top industries that have – and haven’t – made the mobile sales channel or mobile strategy their top priority. The report also examines where most organizations stand regarding the mobile wallet race. Card associations (85%) and issuers (75%) are the most likely to support mobile wallets, as many have made efforts to ensure the cards they issue can be used across multiple mobile wallets. But, only about a third of merchants support mobile wallets, with plans to support mobile payments at the physical point-of-sale and mobile apps for in-store shopping decreasing.
“Given the introduction and expansion of mobile wallet options such as Android Pay and Samsung Pay over the last year and the dominance of Android devices, it’s interesting to see organizations are adopting Android and iOS payment options at similar rates,” said Steven Casco, CEO of CardNotPresent.com and the CNP Expo. “But some organizations are embracing these options more than others. Card associations and issuers are more than twice as likely as merchants to support mobile wallets, as merchants’ support for mobile payments in-store stayed flat while mobile checkout optimization doubled.”
“Mobile commerce is great for merchants and consumers but it’s also great for fraudsters too,” David Montague, Founder, The Fraud Practice, INC. “Until merchants implement techniques to address the unique characteristics of mobile offerings to keep them safe and secure, they’re leaving the door wide open for fraudsters.”
Survey findings include:
- Over 82 percent of merchants actively support the mobile channel today, up from 54 percent at the time of the inaugural survey and 69 percent last year
- Mobile importance, acceptance and revenue has jumped: merchants earning at least 30 percent of revenue in the mobile channel more than tripled to 29 percent from 9 percent last year
- Companies big and small consider mobile ‘very important’ to growth: the share of merchants in the less than $5 million annual revenue range that consider mobile “Very Important” notably increased from 31 to 54 percent
Mobile Runs Deep…But Not Where You Think
- Among the top five industries that have prioritized mobile the most, surprisingly, the Alcohol/Tobacco industry tied with more commonly assumed industries such as Dating/Social sites:
Support for the Mobile Channel by Industry Dating/Social sites 100% Alcohol/Tobacco 100% Direct response 100% Financial services 90.9% Money movement 80%
- Half of Alcohol/Tobacco merchants (50%) generate at least 50 percent or more of their revenue form the mobile sales channel
- Despite the number of mobile-optimized travel services and companies, about one-third of travel merchants (33.3%) earned less than five percent of total revenue from the mobile channel
- Over 50 percent of books/music/video merchants say mobile growth is not very important to their strategy
Complacency in the Mobile Channel: Embrace Mobile Now, Add Security Later
- Despite nearly half of card issuers (44%) and merchants (41%) indicating that mCommerce is ‘somewhat riskier’ or ‘far riskier’ than standard eCommerce, the mobile consumer experience trumped security concerns among the top worries organizations had for the mobile channel:
|2016 Top Mobile Sales Channel Concerns|
|“Making it easier for consumers to transact”||24%|
|“Addressing consumer security concerns”||21%|
|“Managing the complexity of new payment types”||21%|
|“Addressing how to manage fraud risk”||16%|
|“Making it possible to take payments more efficiently”||13%|
Who What Where When: Merchants Unaware of Mobile Fraud
- Over 40 percent of merchants (43%) are unaware of the share of total fraud coming from the mobile channel
- Organizations are more likely to say mobile channel fraud is staying about the same compared to last year (28% vs. 21%), than they are to say that it is increasing (15% vs. 13%)
- Despite the increase in mobile fraud risk over the years, the number of organizations considering it ‘very important’ to be able to detect mobile transactions only increased slightly since 2011 (from 39% to 42%)
- Reporting of increased risk of fraud following major data breaches varied depending on organization: card issuers (55%) were most likely to report greater fraud and merchants (22%) the least likely, as they won’t typically see stolen cards used against them
- About one-third of merchants (33.6%) have made the transition to EMV, but nearly nine in ten merchants report either that mobile fraud hasn’t increased or they are uncertain since the EMV shift (46% and 42% respectively)
- For the second consecutive year, merchants are more likely to state that standard eCommerce fraud tools are sufficient to support risk management in the mobile channel: 36 percent of merchants have this opinion today, the highest rate since the inaugural survey (37%). However, they are using more tools:
- Whereas 40 percent of merchants reported using just one tool or service for managing fraud in the mobile channel last year, this is down to one-third of merchants today
- But, 45 percent of merchants do not plan to add any tools or services to help reduce fraud in the mobile channel in 2016, down from just over 30 percent of merchants that had no such plans in 2015
- While ID Authentication was the most common service for fighting mobile fraud for the past three years, a Rules-based approach took over the top spot this year for merchants.
2016 Top Fraud Tools Rules 43.4% Device ID 41% Fraud Scoring 41% ID Authentication 36.5% Secure Mobile Payments Method 31.7%
Mobile Wallet Race – It’s Closer Than You Think
- Card associations (85%) and issuers (75%) are the most likely to support mobile wallets, as many have made efforts to ensure the cards they issue can be used across multiple mobile wallets. Only 34 percent of merchants support mobile wallets
- While Android devices dominate the smartphone market, more organizations currently support the Android platform (65%). iOS is not too far behind, however, with 61 percent support
- Merchants are more likely to accept Apple Pay (45%) over Android Pay (34%) whereas all other types of organizations are more likely to support Android Pay over Apple Pay (41% vs 35%)
- Merchants supporting mobile optimized checkout nearly doubled from 16 percent last year to 30 percent this year
- Merchants that support mobile payments at the physical point-of-sale and mobile apps for in-store shopping decreased (31% to 29%), with merchants also slightly less likely to support in-person mobile payments compared to last year (27% to 22%)
- Nearly one in four merchants offer direct purchase through a social media platform, while another 28 percent plan to add support for this sometime this year
To download a free copy of the 2016 Mobile Payments & Fraud Survey, click here.
About the Survey
The Mobile Payments & Fraud Survey 2016 Report is the fourth annual installment of this study conducted by Kount, CardNotPresent.com and The Fraud Practice, LLC. The Survey was conducted from November 2015 to March 2016, and highlights the growth, opportunity, obstacles, preferences and priorities identified by payments and/or fraud professionals. Thousands of merchants and service providers have participated in the survey over its four-year history. Respondents represented a variety of organizations within the payments ecosystem, including Merchants, Service Providers, Acquirers, Card Associations and Issuers from organizations of all sizes, from those earning annual revenues of less than $5 million to companies earned more than $50 million per year in revenue. Merchants represented over half of all survey respondents.
Kount helps businesses boost sales by reducing fraud. Our all-in-one, SaaS platform simplifies fraud detection and helps online businesses accept more orders. Kount’s turnkey fraud platform is easy-to-implement and easy-to-use. Kount’s proprietary technology reviews billions of data points and provides maximum protection for some of the world’s best-known brands. Merchants using Kount can accept more orders from more people in more places than ever before. For more information about Kount, please visit www.kount.com.
About The Fraud Practice LLC
The Fraud Practice is a privately held US LLC based in Sarasota, Florida. The Fraud Practice provides training and consulting services on ecommerce payments, fraud prevention and credit granting. Businesses throughout the world rely on The Fraud Practice to help them build and manage their fraud and risk prevention strategies. For more information, please visit www.fraudpractice.com.
As one of the only sources of content focused solely on the growing card-not-present (CNP) segment of the payments industry, CardNotPresent.com is an independent voice generating original news, information, education and inspiration for and about the companies and people operating in the CNP space. The company’s media platforms include the CardNotPresent.com portal, CNP Report, CNP Expo, and CNP Awards. Sign up for free to receive the twice-weekly CNP Report featuring comprehensive coverage of the CNP payments space at www.cardnotpresent.com/signup/.
Dotted Line Communications for Kount