Merchants: “Mobile Fraud Is Growing. Meh.”
Experts predict that mobile commerce will double in the next couple of years, reaching $250 billion by 2020. And as mobile commerce grows, so does fraud in the mobile channel.
In fact, in the Mobile Payments & Fraud: 2017 Report, nearly 40% of merchants reported that mobile channel fraud increased between 2016 and 2017. That’s a 59% increase over the previous year, when only 23% of merchants said mobile fraud increased.
Yet at the same time that merchants reported increasing mobile fraud, they were becoming less likely to consider the mobile channel riskier than conventional eCommerce. In fact, the percentage of merchants that said mobile fraud risk was “Somewhat Riskier” or “Far Riskier” than conventional eCommerce decreased by 57% over the past 3 years.
What’s the explanation for this seeming paradox and virtual shrug? Why do merchants on one hand say mobile fraud is increasing and on the other hand say it’s getting less risky? Potential answers include:
- 42% of merchants are not sure if mobile fraud is increasing or decreasing in proportion to mobile volume growth. This uncertainty might be the biggest factor contributing to the apparently conflicting responses.
- For smaller online merchants (under $25 million annual revenue) and certain market segments, mobile commerce still comprises a fairly small percentage of their overall revenue and transaction volume. Thus, their experience with mobile fraud may be somewhat limited, influencing their responses.
- Overall, 14.4% of merchants are still unable to detect if a mobile device is involved in a transaction. That percentage jumps to 28.3% for merchants with less than $5 million in annual revenue. The responses from these merchants may also be impacting results.
- Finally, the dramatic growth of mobile apps—which online merchants consider to be less risky than browser-based mobile commerce by a more than 2 to 1 margin—may also be affecting results. Online merchants who generate a higher percentage of mobile income tend to deploy mobile apps. With the majority of their mobile income coming through mobile app transactions, their answers may reflect their experience of lower fraud rates (versus with browser-based transactions).
Yet other industry data reveals trends in mobile commerce that should make online merchants sit up and take notice.
- 60% of fraudulent transactions originate from a mobile device, based on research from RSA.
- The fraud rate for mobile commerce is twice as high as for conventional eCommerce, according to The Fraud Practice.
- $2.33 in costs for every $1 in fraudulent mobile transactions, per LexisNexis estimates of the “true cost” of mobile fraud.
- Mobile conversion rates are 70% lower than desktop conversion rates.
It’s clear that online businesses need to take their game to the next level when it comes to fraud prevention and mobile commerce.
- Increased mobile revenue means increased mobile fraud. Regardless of how fast mobile fraud is increasing in proportion to mobile sales, it’s vital that your systems can handle the unique risk elements and vulnerabilities associated with mobile commerce.
- If you can’t see it, you can’t stop it. Being able to detect mobile devices in transactions is the first requirement for improving mobile fraud prevention.
- Reduce friction without increasing fraud. Make sure your fraud prevention systems don’t introduce delays into mobile checkout and reduce mobile conversion rates.
Get further insights about payments and fraud in the fast-growing mobile channel. Download the Mobile Payments & Fraud: 2017 Report. You’ll find more than 60 charts and tables that provide valuable insights into the state of mobile commerce, based on responses from over 800 online merchants.