The big revolution in e-commerce over the past few years has been the advent and rapid rise of mobile payment solutions. Coming about as a direct consequence of the incredible popularity of the smartphone and their now near ubiquitous status, mobile payments provided unprecedented amounts of convenience to the user. It offered a secure and fast way to conduct financial transactions, unbound by geographical limitations.
However, is it truly as secure as we believe? Last year, we reported on the state of mobile payments, and the challenges it faces; how has the scenario changed since then? The annual report on Mobile Payments & Fraud Survey 2017 sheds some light on these queries, as well as providing cutting insight into merchant practices.
Mobile Fraud Is On The Rise Despite Greater Merchant Confidence
The report bases its data on responses from the list of surveyed merchants. According to the report, more and more merchants are getting over the anathema that was associated with mobile payment security. A greater number of merchants are starting to believe that mobile payment is more secure than they initially did.
The proportion of merchants, believing that mobile payments are “far riskier” than the standard e-commerce counterpart, has gone down from 13.9% to 7.5% between 2016 and 2017. Similarly, merchants, believing that mobile payments were “somewhat riskier” than e-commerce, also went down from 20.7% in 2016 to 17.6% in 2017. The overwhelming majority of merchants believed that mobile payments were just as risky as the standard web eCommerce (59.9% in 2017 up from 49.2% in 2016).
Consequently, the number of merchants who considered mobile payments to be “less risky” also increased from 9.8% to 15% just in one year. As mobile payment platforms mature, and new security protocols are adopted, merchant confidence in these solutions has grown.
However, despite this vote of confidence, mobile fraud is on the rise. 39% of merchants in 2017 believe that mobile fraud has increased, up from only 23% in 2016. Consequently, merchants who believe that mobile fraud has decreased has greatly reduced to 6% in 2017, down from 17% in 2016.
This is likely due to the exploded adoptions and increasing the user base of these payment solutions. As a result, greater volume growth has been accompanied by greater instances of fraud. The report’s data backs this up, with 29% of merchants believing that mobile fraud has grown proportionally with volume. 21.3% believed that mobile fraud has increased at a greater rate than volume growth, while only 7.7% believed that fraud decreased compared to volume growth.
So, what are the precautionary measures merchants and mobile payment processing companies need to employ?
Fighting Fraud: Tools And Their Implementation
With a significant increase in mobile fraud instances, there is a need for better protection. This viewpoint seems to be shared by merchants too. The proportion of merchants who believe that mobile requires specialised fraud tools has increased from 20% in 2016 to 24.8% in 2017. Those who believe that standard eCommerce security is adequate has fallen from 35.5% to 28.8% during the same period. Moreover, a large majority of 46.5% find the eCommerce security process lacking for mobile in some capacity.
This is especially the case with large merchants (>$500 million annual revenue), where a greater percentage believe that mobile requires a specialised set of tools (30.1%). In contrast, a larger proportion of smaller merchants (<$5 million annual revenue) finds standard eCommerce process adequate (30.8%). It would seem that merchants with higher revenue turnover are much more concerned with the risk of fraud.
So what tools are merchants using to fight fraud? The answer is numerous. Nearly 75% of merchants use multiple tools, with 16% even using 8+ tools in conjunction. The most popular security tool in 2017 was CVV, which was used by 58.3% of merchants. Following behind were Fraud Scoring (48.4%), Complete Fraud Protection (46.6%) and AVS (46.2%). Device ID (37.7%) and Velocity Checks (34.5%) were also quite popular tools. The most surprising development was the explosion in popularity of CVV, which went from virtually no use in 2015, 2016 to majority use in 2017. Another completely new adopted practice was 3D Secure Cardholder Authentication, used by 18.4% of merchants in 2017, compared to no use in previous years. Biometrics was another security measure that gained some traction in 2017. This is likely due to the more prevalent implementation of biometric sensors in this year’s smartphones.
Consequently, the previously popular Rules ceased to be used completely in 2017. This is quite surprising, considering it was used by over 46% of merchants in 2016. The situation is same with geolocation, which saw no use in 2017. This tool was likely replaced by mobile geolocation, whose use-share almost doubled to 27.8% in 2017.
AVS and CVV tools remained incredibly popular among both, large and small merchants. However, larger merchants preferred Complete Fraud Protection, Fraud Scoring and Velocity Checks much more than smaller merchants. This is likely due to the more complex and expensive implementation of these anti-fraud tools.
Of course, the tools used also differed based on the industry in question.
- While Biometrics is preferred by Dating/Social, Money Transfer and Telecom segments, it saw little use in other verticals.
- Complete Fraud Protection, Fraud Scoring and Device ID saw high use across the board, making them three of the most popular anti-fraud tools.
- Despite its popularity in Money Transfer, OTP is scarcely used in other verticals, except Insurance.
- AVS is another popular tool but has no use in Money Transfer activities.
- Similarly, Velocity Checks are fairly popular but see no use in Dating/Social verticals
- Along with OTP, NFC was the least popular tool. It only saw any real use in Money Transfer.