In 2014, merchants experienced nearly twice the fraud rate in m-commerce versus e-commerce. A recent study from LexisNexis indicates that the most common types of fraud through mobile are identity theft, request for return or refund and international cross-border. The burden of tracking mobile fraud rests with merchants, as financial institutions have no reason to track this separately from online channel fraud.
Here are a few things for merchants to consider while considering a mobile commerce fraud strategy to increase average transaction volumes and average transaction values while minimizing fraud and associated costs.
1) Digital gift cards
Fraudsters are hijacking consumers’ loyalty card accounts, draining the stored value of their cards, and then using the auto-reload function to hack consumers’ associated debit and credit cards. Security experts say attacks like that on the Starbucks gift cards – work because many Starbucks customers linked their credit or debit cards to the gift cards that are loaded onto their mobile payment apps and because criminals who access victims’ Starbucks.com accounts can easily move value from a consumer’s gift card to a card they control.
It would be prudent for merchants to make sure that each secured transaction is fully authenticated before presentation for authorization. The key would also be to minimize user friction while providing a secure and seamless end user experience.
2) Native, web or hybrid apps
Many organizations treat mobile transactions differently than those that come from the web. A medium sized retailer saw a lot of credit card fraud coming in over their iPhone app. This happened because the fraudsters had figured out the retailer wasn’t applying the same level of verification for mobile transactions as they do for the web.
Since consumers demand options, merchants are under pressure to accept transactions from multiple channels including via native apps, web or hybrid apps. It would be prudent for merchants to look at m-commerce fraud solutions that takes into account device specific capabilities as well as identify the source of the transaction – be it from a smartphone, tablet or even a device emulator.
If you are a mobile commerce merchant or moving into m-commerce, then you really care about increase sales while reducing fraud. As it turns out, the ability to avoid a breach before fraudsters enter some sensitive area is the difference between a $350 prevention and a $350,000 clean-up.
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