With a new year, comes new trends as well as new issues. One of the new trends that has a lot of merchants concerned is the rise in popularity with mobile payments. Mobile payments and its recent rise in popularity has spun the traditional payment system on its ear. Even further, companies, especially those in the retail space have had to adapt their marketing strategies in different channels, change their approach to the consumer, and has brought an evaluating light on their data security and fraud protocols.
Why Concern About Mobile Payments?
Before we begin, you might be wondering why businesses have begun worrying about mobile payments. Here’s why; In 2014, mobile payments accounted for $52 billion in U.S. transactions alone, the early numbers for 2015 account for somewhere around $67 billion. That’s a lot of money, everyone from Uber and Starbucks, to big box retailers are seeing the benefits of having their customers leave their wallets at home.
However, where the money goes, crime follows. Mobile fraud now makes up 21% of the $6 billion that fraud costs merchants and card issuers in the US each year. The crazy thing, mobile payments only account for 14% of transactions amongst merchants that accept mobile payment.
The Cost To The Merchant
For each dollar spent on fraudulent purchases costs the merchant $3.34. Thats slightly more than the cost of card present fraud and 27% more than CNP fraud from a PC. Additionally, mobile fraud is harder to track for two reasons: First, the IP address is assigned from where the smartphone is purchased, not its current location. Second, most companies and investigators aren’t equipped to trace mobile Ips.
Despite the high fraud costs, mobile commerce merchants are still keeping overall fraud costs low, but that’s mainly because of the relatively low volume of purchases in comparison to online and in store. However, as the popularity of mobile commerce increases this model will become unsustainable unless proper anti-fraud measures are put in place.
In the mean time, if you are a merchant who accepts mobile payments, make sure your fraud measures are up to date, and make sure to set up some verification system to determine that purchases are legitimate.