Mobile payments and fraud survey finds merchants expanding mobile payments fast but still naïve about fraud

Don Bush, VP of marketing at Kount

Despite mobile fraud growing by 81% between 2011 and 2015, nearly four out of ten merchants (38.5%) say their biggest challenge managing fraud risk in the mobile channel is figuring out if they even have a mobile fraud problem in the first place.

According to the latest data from the 2016 Mobile Payments & Fraud Survey, the majority of merchants are overwhelmingly incorporating mobile payment options into their online and mobile commerce strategies. But, they are unaware of the type of risks these new technologies bring – let alone what they even look like.

“Despite awareness that the mobile channel poses a greater risk than standard eCommerce, businesses are taking a blanketed approach to their security strategies,” said Don Bush, vice president of marketing at Kount. “Security is an essential part of the consumer experience.

And, as we saw with the rampant spread of data breaches, if organisations don’t have a tailored strategy to manage fraud as it evolves, they, and their customers, will be paying for it for years to come.”

As organisations small and large have embraced mobile at similar rates, their focus has remained on finding ways to adapt to mobile that offer more convenience to their targeted audiences, dedicating resources to expanding mobile offerings but sacrificing security in the meantime.

Instead, they’re relying on traditional eCommerce protection tools to manage risk in the mobile channel, even when nearly half (41%) acknowledge that mCommerce is riskier.

Other findings from the report take a look at the surprising top industries that have – and haven’t – made the mobile sales channel or mobile strategy their top priority. The report also examines where most organisations stand regarding the mobile wallet race.

Card associations (85%) and issuers (75%) are the most likely to support mobile wallets, as many have made efforts to ensure the cards they issue can be used across multiple mobile wallets. But, only about a third of merchants support mobile wallets, with plans to support mobile payments at the physical point-of-sale and mobile apps for in-store shopping decreasing.

“Given the introduction and expansion of mobile wallet options such as Android Pay and Samsung Pay over the last year and the dominance of Android devices, it’s interesting to see organisations are adopting Android and iOS payment options at similar rates,” said Steven Casco, CEO of CardNotPresent.com and the CNP Expo.

David Montague, Founder, The Fraud Practice, INC
David Montague, Founder, The Fraud Practice, INC

“But some organisations are embracing these options more than others. Card associations and issuers are more than twice as likely as merchants to support mobile wallets, as merchants’ support for mobile payments in-store stayed flat while mobile checkout optimisation doubled.”

“Mobile commerce is great for merchants and consumers but it’s also great for fraudsters too,” David Montague, Founder, The Fraud Practice, INC. “Until merchants implement techniques to address the unique characteristics of mobile offerings to keep them safe and secure, they’re leaving the door wide open for fraudsters.”

Survey findings include:

Mobile surges

  • Over 82% of merchants actively support the mobile channel today, up from 54% at the time of the inaugural survey and 69% last year
  • Mobile importance, acceptance and revenue has jumped: merchants earning at least 30% of revenue in the mobile channel more than tripled to 29% from 9% last year
  • Companies big and small consider mobile ‘very important’ to growth: the share of merchants in the less than $5 million annual revenue range that consider mobile “Very Important” notably increased from 31 to 54%

Mobile runs deep…but not where you think

  • Among the top five industries that have prioritised mobile the most, surprisingly, the Alcohol/Tobacco industry tied with more commonly assumed industries such as Dating/Social sites:
Support for the Mobile Channel by Industry
Dating/Social sites100%
Alcohol/Tobacco100%
Direct response100%
Financial services90.9%
Money movement80%
  • Half of Alcohol/Tobacco merchants (50%) generate at least 50% or more of their revenue form the mobile sales channel
  • Despite the number of mobile-optimised travel services and companies, about one-third of travel merchants (33.3%) earned less than five percent of total revenue from the mobile channel
  • Over 50% of books/music/video merchants say mobile growth is not very important to their strategy

Complacency in the mobile channel: Embrace mobile now, add security later

  • Despite nearly half of card issuers (44%) and merchants (41%) indicating that mCommerce is ‘somewhat riskier’ or ‘far riskier’ than standard eCommerce, the mobile consumer experience trumped security concerns among the top worries organisations had for the mobile channel:
2016 Top Mobile Sales Channel Concerns
“Making it easier for consumers to transact”24%
“Addressing consumer security concerns”21%
“Managing the complexity of new payment types”21%
“Addressing how to manage fraud risk”16%
“Making it possible to take payments more efficiently”13%

Who what where when: Merchants unaware of mobile fraud

  • Over 40% of merchants (43%) are unaware of the share of total fraud coming from the mobile channel
  • Organisations are more likely to say mobile channel fraud is staying about the same compared to last year (28% vs. 21%), than they are to say that it is increasing (15% vs. 13%)
  • Despite the increase in mobile fraud risk over the years, the number of organisations considering it ‘very important’ to be able to detect mobile transactions only increased slightly since 2011 (from 39% to 42%)

Reporting of increased risk of fraud following major data breaches varied depending on organisation: card issuers (55%) were most likely to report greater fraud and merchants (22%) the least likely, as they won’t typically see stolen cards used against them

About one-third of merchants (33.6%) have made the transition to EMV, but nearly nine in ten merchants report either that mobile fraud hasn’t increased or they are uncertain since the EMV shift (46 and 42% respectively)

To download a free copy of the 2016 Mobile Payments & Fraud Survey, click here.

Comment on this article below or via Twitter: @ VanillaPlusMag OR @jcvplus

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