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Mobile Fraud: What You Don’t Know Can Hurt You

posted on: Wed May 04 2016

There’s an old joke in advertising: “I know half my advertising budget is wasted. I only wish I knew which half.” Unfortunately, too many eCommerce merchants could make a similar (bad) joke about their fraud prevention systems. This is especially true when it comes to mobile commerce – the fastest growing channel in eCommerce today.

mobile fraudA surprising number of eCommerce merchants confessed in the recently published Mobile Payments and Fraud: 2016 Report that they lacked clear visibility into the impact that mobile fraud has on their operations. Some eyebrow-raising findings from the report: 

  • Half of merchants (49.1%) are uncertain if fraud in their mobile channel is increasing or decreasing
  • 43% of merchants don’t know what share of overall fraud losses are caused by mobile fraud
  • 8% can’t tell if fraud is more prevalent in international mobile transactions or domestic mobile transactions
  • Nearly 1 in 3 merchants (31.1%) do not track fraud by channel at all (an additional 12.8% are ‘uncertain’ if they track fraud by channel)
  • 2% of merchants are unable to detect if a mobile device is being used in a transaction

That’s a lot of uncertainty for such an important and rapidly-growing revenue source. After all, nearly 1 in 3 merchants (29.5%) project that mobile sales will account for more than half of their overall revenue within 2 years. 

What’s more, there is substantial evidence that mobile transactions are more likely to involve fraud (which makes the lack of visibility even more concerning):

  • 9% of merchants believe mobile commerce is riskier than traditional eCommerce (13.9% say “far riskier” and 27% say “somewhat riskier”)
  • The Fraud Practice reports that fraud losses from mobile transactions are 2X higher than from conventional eCommerce (1.32% of revenue vs. 0.68% from revenue)
  • 2015 LexisNexis Risk Solutions True Cost of FraudSM Study calculates $2.08 in actual fraud loss for each $1 of mobile commerce fraud

Are you one of these merchants “flying blind” when it comes to mobile fraud? If so, you could be putting your company (and your career) in potential jeopardy. To remedy the problem, you might consider choosing an ad hoc approach. You wouldn’t be alone. The Mobile Payments and Fraud: 2016 Report found that merchants are employing an increasing number of specialized tools and/or more stringent processes to fight mobile fraud, the top 4 being: 

  1. Rules
  2. Device ID
  3. Fraud Scoring
  4. Geolocation

However, taking a more holistic and integrated approach may be more effective in the long-term. You avoid having to operate and maintain two separate systems – one for traditional eCommerce and one for mobile transactions.

For lower total lifetime costs, choose a best-in-class fraud prevention solution that integrates comprehensive mobile fraud prevention into an overall eCommerce fraud mitigation system. In addition to enabling faster mobile checkout – a key requirement for consumers – you’ll also achieve important business objectives:

  • Greater visibility and lower uncertainty
  • Reduced risk / reduced fraud losses
  • Less operational complexity
  • Streamlined costs

Discover all the latest trends in mobile payments and fraud by downloading the Mobile Payments and Fraud: 2016 Report. It features 93 charts and 100+ pages of insightful data, arming you with the information you need to more effectively fight fraud in the mobile channel.

Mobile Payments & Fraud: 2016 Report