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Payment Platform Disruptions Create Opening for Fraud

posted on: Mon Aug 27 2012

You may have seen a few big stories lately that indicate some significant changes afoot in the payments industry. Square has garnered some media attention lately from their recent agreement with Starbucks and its announcement of a new monthly pricing structure for small businesses. Earlier this week, PayPal announced a partnership with Discover that will substantially expand its reach to more than seven million retail locations. Throw in a partnership of major retailers creating a new mobile payment solution and you have a significant trend gaining even more steam.

Of course mobile payment options aren’t new and there are many more options to come as NFC and other technologies gain adoption. Today however, the bulk of this trend ties back to apps. Long before the Square partnership, Starbuck’s created an app that enables you to pay at the counter with your smartphone with a prepaid balance, which can also charge your credit card if you choose to auto-reload your balance. We would expect the Best Buy and Wal-Mart retail alliance to produce something similar where the credit card is the ultimate payment option, one that is never physically swiped. And that’s where the problems start to emerge.

Kount specializes in the card-not-present space and has seen fraud continually evolve at the same rate as innovation and purchasing trends. We’ve reviewed hundreds of millions of transactions with our technology and just as we’ve seen mobile payments surge more than 850% in two years time, we have seen fraud follow every trend.

As PayPal becomes an option everywhere Discover is accepted, that adds up to more opportunities to tap into the bank or checking account, credit card or other option your customer is using as a payment method. The same holds true with apps and other payment methods that eliminate the physical swipe of a credit card and process everything online. More online transactions equal more opportunities for fraud.

Certainly you don’t want to miss a potential sale by eliminating payment options for your business, nor do we recommend it. Having a strong, versatile and evolving fraud solution such as Kount Complete simply means you review the processes you have in place and adjust if necessary. An influx of card-not-present transactions should be good for your business and add to your bottom line, instead of chargebacks, fees and other fraud-related financial penalties. So if you’re an online or physical retailer looking to branch out with an app, or considering some of the emerging opportunities to process transactions, be sure your fraud solution has both the capabilities and flexibility to manage the new and emerging payments landscape. You can rest assured Kount does.