Mobile Payments Increase Fraud Risks
The highest card-not-present fraud volume in 2009 was from merchants accepting mobile phone payments. According to a Javelin Strategy and Research survey, on average, retailers faced about 3,400 attempts to perpetrate fraudulent transactions per month. Due to the large number of attempts, 38 percent of counterfeit transactions go through undetected.
As a percentage of total revenue, fraud losses were 1.13 percent for mobile merchants, 0.86 percent for merchants with both online and brick-and-mortar outlets, and 0.83 percent for online-only merchants. In the Javelin poll, 25 percent of retailers of questioned said they still plan to start accepting mobile payments within the next year. The majority of consumer card fraud occurs on existing debit and credit card accounts, according to the Javelin survey, with credit and debit card fraud respectively accounting for 65 percent and 28 percent of all existing card fraud last year.
Merchants should fight fraud by increasing the use of point-of-sale authentication devices, rules-based filters, internet protocol address detection, tracking tools and online-purchase authentication systems. They should not rush into the acceptance of mobile phone payments without first reducing their likelihood of victimization. Merchants should thoroughly check the history, reliability, and security of their merchant service providers.
Loretta Hunnicutt
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