Consumers are opting for mobile payments and purchases at such an exponential rate, many businesses are not yet fully equipped to deal with the corresponding mobile fraud — especially m-fraud that happens via mobile apps. Unfortunately, fraudsters are acutely aware of the vulnerability.
Cellphones have quickly become the go-to tool for everything. They’re a pocket-sized navigation system, encyclopedia, calculator, stereo system and hub of communication. And as of 2017, smartphones have become one of the most preferred methods chosen by consumers for their banking, payment and shopping activities.
Over half of all smartphone users in the United States use mobile banking on a frequent basis, and that number is expected to rise by the end of the decade. Concurrently, purchases made on smartphones now account for 40% of total online sales with plenty of room to grow. In fact, this last holiday season was the first time in history that people made more online purchases via their mobile phones than with their computers.
That being said, a large portion of consumers are still hesitant to use their mobile phones for online transactions due to security and fraud fears.
According to the last US Federal Reserve Consumers and Mobile Financial Services report, 67% of people who avoid making purchases with their mobile devices and 73% of people who avoid mobile banking say security issues are to blame. The main points that worry these consumers include the possibility of data interception, fear that the phone will be hacked, worry that their phone will be lost or stolen, and concern that companies don’t provide sufficient security for mobile transactions.
As it stands, these consumers have a right to worry – especially when it comes to how companies ensure mobile transaction safety. Mobile payment and banking activity increased so quickly, many banks and online retailers haven’t had the time or knowledge to fully arm themselves against mobile fraud, especially fraud that happens via mobile apps. Unfortunately, keen fraudsters are aware of this. Fraudsters are always on the hunt for easy ways to make money, and they know that new payment and banking methods often come with security vulnerabilities. This makes m-commerce and m-banking a lucrative hunting ground.
As mobile transactions continue to grow, businesses and financial institutions would do well to re-examine their mobile fraud prevention methods. Take banks, for example. Manual processes have long driven their risk management systems — a holdover from when loan applications, money withdrawal and other banking activities were done in person. But mobile banking necessitates an update in these processes, as financial institutions need to be secured with efficient authentication protocols in place at the front end to protect both themselves and customers.
Meanwhile, a plethora of e-commerce sites have tried to adapt existing fraud solutions to fit to mobile. Unfortunately, this doesn’t always translate to a friction-free customer journey. That’s why it’s often best for businesses to think about fraud prevention solutions specifically designed for the mobile channel, where customer ease is of utmost importance.
The good news is that as more and more customers gravitate toward mobile transactions, more and more enterprises will focus on mobile-specific fraud prevention methods. This means that some of the fears consumers have about mobile transactions will be alleviated, and the mobile environment will be further optimized to meet more customers’ needs.
When approaching which fraud prevention methods work best for mobile, businesses have two strong options to consider. The first is a device fingerprinting solution. A person’s device acts as his or her online identity — basically, it’s the closest technological equivalent to face-to-face transactions. The device used in a transaction is also one piece of ‘identity’ that is difficult for fraudsters to continue replacing, unlike easily switched out online identifiers such as email addresses. Distinguishing customers’ devices via their unique characteristics and analysing them independently of personal data gives businesses the ability to verify transacting devices and thus verify the connected customer.
Banks and businesses can also block mobile fraud with a mobile SDK (software development kit). This type of solution can usually be integrated into existing apps with a quick and easy insertion of a short code snippet. This will then allow businesses to identify high-risk transactions across all mobile payment and banking platforms, including e-wallets, native apps and one-click payment set ups. Some mobile SDKs can also detect tampered devices and predict the probability of account takeover fraud. This gives businesses the ability to instantly and confidently accept on-demand activity within a native mobile application, from bank withdrawals to major e-commerce purchases.
The volume and complexity of mobile fraud attacks will no doubt continue to rise. That’s why it’s imperative that banks and online businesses don’t hesitate in making sure the solutions they have in place are expertly developed to handle the ever-increasing and ever-changing mobile world. After all, fraudsters have learned to prey on our mobile-first world and they won’t hesitate to attack companies that phone in their mobile fraud protection.