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A Pair of Paradoxes In Mobile Fraud Prevention

posted on: Thu Apr 21 2016

mobile fraudWhen it comes to fighting fraud, 8 of 10 organizations – merchants, acquirers, card associations, card issuers, and service providers – say it’s important to be able to detect if a mobile device is being used in an eCommerce transaction. Here’s the breakdown from the recently published Mobile Payments and Fraud: 2016 Report:

  • 43% = Very Important
  • 17% = Important
  • 22% = Somewhat Important

    82% says it’s important

That makes sense, as The Fraud Practice reports that mobile transactions are 2X more likely to involve fraud. What does NOT make sense is that the same Mobile Payments and Fraud: 2016 Report also finds that nearly 4 in 10 organizations are NOT able to do to detect if a mobile device is being used in an eCommerce transaction.

That seems strange – 8 in 10 say it’s important, yet half of those aren’t doing anything about it. Why not?

Here’s another puzzle: over the previous 3 year period, the number of organizations that said it was important to be able to detect if a mobile device is being used in an eCommerce transaction steadily increased from 82% (2012) to 89% (2013) to 94% (2014). But then in 2015, that trend reversed, dropping to 80%? Why the fall? Especially if – as The Fraud Practice reports – mobile fraud is higher?

These 5 additional findings from the Mobile Payments and Fraud: 2016 Report explain the twin paradoxes:

  1. Lack of Tracking. More than 4 in 10 organizations do not track fraud by channel or are uncertain if they do. This is probably due to the fact that mobile transactions are still a smaller percentage of overall revenue for many merchants. So even if the fraud rate is actually much higher in the mobile channel – it remains hidden. This translates into a lack of urgency in identifying mobile transactions.
  2. Lack of Comparative Data. Closely related to the statistic above, 43% of merchants don’t know mobile’s share of fraud losses. Thus, a merchant may see fraud losses increase by 5% and take some general steps to address the issue (e.g., more manual reviews). But if the merchant realized, for example, that almost all of that increase was coming solely from a growing number of mobile transactions, the urgency to identify mobile transactions would become much greater.
  3. Lack of Visibility. Nearly half of organizations (49%) report that they are uncertain whether or not fraud is increasing in the mobile channel. This lack of visibility into their own revenue stream similarly contributes to lower urgency. They may read industry publications that say mobile fraud is higher, but because they can’t see the impact within their organizations, they put off taking additional steps.
  4. Perceived Higher Costs. Two-thirds of merchants think standard eCommerce fraud processes and tools cannot fully manage mobile channel fraud risk. In fact, 20% say mobile requires very specialized tools. This perceived need for expensive new tools is a big factor in why merchants may delay taking steps to identify if a mobile device is being used in an eCommerce transaction.
  5. Uncertainty About Next Steps. 23% of merchants say their lack knowledge is the biggest obstacle to managing mobile risk. Another 39% say that determining if their company has a mobile fraud problem is a challenge. This uncertainty and doubt can lead to inertia.

To address all of the factors above, we recommend employing a best-in-class fraud prevention solution that integrates mobile fraud prevention into your eCommerce fraud mitigation. This ensures your system can offer these key capabilities coupled with real-time processing to make it easy and affordable for you to identify mobile transactions and fight mobile fraud better.

  • Know if a mobile device is being used for transaction
  • Identify what type of mobile device is being used
  • Pinpoint the “real” location of the mobile device
  • Determine if the device is a pre-paid device
  • Know if the phone number being used is a forwarded number
  • Associate other transactions with the device
  • Determine if it is a card-present or a card-not-present transaction
  • Ascertain if the financial information being used has been compromised

Not only do you need advanced mobile fraud capabilities, you need the tracking, visibility, and comparative data to understand just how much (or little) time you should spend fighting mobile fraud. Clear, concise reporting shows you exactly where to take action and where things are OK.

Want to know more about the state of mobile payments and fraud? Download the Mobile Payments and Fraud: 2016 Report, which includes 93 charts and page-after-page of useful data, providing you with actionable information to fight fraud in the mobile channel.

Mobile Payments & Fraud: 2016 Report