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Overcoming the Hurdles of Mobile Commerce

posted on: Mon Jun 29 2015

Mobile CommerceGood news for mobile commerce (mCommerce), but bad news for oral hygiene – almost a billion more people own a mobile phone than own a toothbrush. And while mobile device ownership around the world keeps growing, so does the opportunity to buy and sell products anywhere in the world. The number of mobile transactions is expected to reach up to three quarters of a trillion dollars by 2017. If only we could project the same growth for toothbrushes!

With immense opportunity to capitalize on mCommerce and reach new customers globally, retailers are rapidly adopting new technologies to offer consumers the ability to make purchases on their mobile devices. As merchants seek to maximize revenues through mobile channels, they’re in need of the right tools to prevent fraud and must understand the challenges that come along with mobile commerce, especially as they expand to new regions. The cost of fraud on mobile is high -- $3.34 in hidden costs for every dollar of fraud compared to $2.62 for online fraud.

As mCommerce continues to grow, merchants should consider these three points:

Transaction Origination

Many of the telltale signs of fraud may come from knowing what type of device is being used in a transaction. Different mobile devices have different fraud and purchase profiles. For example, iPads generally have higher average ticket sales than Android smartphones, while pre-paid devices tend to be used more frequently than other mobile devices by fraudsters. By identifying the type of mobile device used in a transaction, you can make more informed decisions about which transactions should get reviewed and may have a greater likelihood for fraud.

Mobile Transaction Types

While it’s easy to place mobile transactions all into one bucket – there are actually five different kinds of mobile transactions. By knowing the distinctions of where and how these transactions work, you’ll better understand each transaction type’s unique vulnerabilities and susceptibility to fraud. The five categories of mobile transactions include:

  • Mobile at the Point-of-Sale (which uses Near Field Communication or NFC for contactless payments systems)
  • Mobile as the Point-of-Sale (when a mobile device is used to process a transaction)
  • Mobile Payment Platform (centralizes gift cards, debit cards, and credit cards so that users only need to use one account make purchases)
  • Direct Carrier Billing (wireless provider pays for the purchases and then adds the charges to the wireless account holder’s monthly
  • Closed-Loop/Open-Loop Mobile Payment Wallets (single merchant programs such as Starbucks or multiple merchant wallets as Android Pay or Apple Pay)

“Real” Location of the Transaction

Location, location, location – it’s not just important for real estate, but also for detecting fraud in mobile transactions. Proxy IP addresses or connecting through carrier network IPs are frequently used on mobile device transactions and can distort the real location of a device. The best fraud prevention tools can identify a device’s actual location. Without location data, merchants offer fraudsters another way to mask their activity.

Mobile commerce offers more opportunities for merchants to gain new customers and streams of revenue. But the added benefits of mCommerce can easily be derailed by fraud. Especially as mobile commerce can be even riskier than eCommerce, merchants need the right fraud solution in place before taking advantage of all that mCommerce has to offer. Mobile adoption and technology are only going to evolve, constantly opening up new holes in security for fraudsters. Along with conducting audits of your payment and fraud systems regularly, make sure you have the right tools in place that can detect and predict fraud before it happens.

To learn more about mobile transactions and fraud, check out Kount’s eBook Nowhere To Hide: Uncover Mobile Fraud Before It’s Too Late.