We've all been the targets of fraudsters in one way or another. Whether it's pesky phishing emails landing in your inbox, or your bank calling to verify your spending habits.
As payment technology evolves, fraudsters find even more elaborate ways to con honest people out of their cash, which is concerning to customers and costly for merchants.
In the US, mobile payments not only account for a disproportionate amount of fraud for merchants, but they’re also the most expensive type of fraud. The online payment fraud statistics are staggering; mobile payment fraud alone accounts for an average of 27% of online sales, a significant increase from 18% in 2018.
In this article, we'll be discussing the tell-tell signs of m-commerce fraud and how to prevent it.
What is mobile payment fraud?
In laymen's terms, mobile payment fraud is any fraudulent transaction carried out by a cybercriminal that happens online via a mobile device, including tablets, and wearables. The perpetrator will seize the victim of funds, personal information, property, or interest.
Mobile payment fraud can be perpetrated by anyone, raging anywhere from unauthorized transactions, stolen merchandise, or false refund requests.
Types of mobile payment fraud
With any changes in technology, fraudsters are hot on their tail. and the list of different types of payment fraud that merchants need to watch out for:
A fraudulent transaction slips through the merchant's prevention system, which the cardholder later disputes to reclaim the stolen funds.
Fraud with no malicious intent from the customer, who disputes a true transaction due to forgetfulness, household members making unknown purchases, or unclear merchant descriptors. The nature of m-commerce, allowing for spontaneous purchases and a lower price point, creates more opportunities for friendly fraud to arise.
When stolen card credentials are used to purchase goods or services. True fraud results in the cardholder disputing the fraudulent purchase and the merchant receiving an unwinnable dispute.
Methods of payment fraud
Phishing is an email, website, or SMS that asks to input personal or private data such as credit card or banking details to facilitate a transaction. If the source is trusted, such as replicating a merchant the customer has an account with or even their bank. Many people think of e-mail or social media when they think of fake messages, but phishing attacks via SMS have risen over recent years and do not always set off alarm bells.
SIM swapping offers fraudsters ripe opportunities. Fraudsters can swap a SIM, by gaining access to the victim's details through phishing attacks, the dark web, or social media. The criminals ask the victim's network carrier to transfer the SIM details to another sim in a new device.
Therefore, allowing the fraudster access to accounts with merchants where the victim has a two-factor authentication set-up and making fraudulent orders to later liquidate. Later resulting in true fraud chargebacks to the merchant.
Account takeover (ATO)
89% of digital fraud losses happen via ATO. Fraudsters gain access to customer accounts either through a stolen device or through mobile malware (virtually taking control of a device).
How to prevent mobile payment fraud
There are numerous methods to protect yourself and your customers and yourself against payment fraud risks.
Include checkout friction
Customers have a notoriously low tolerance for checkout friction, tempting merchants to skip asking for details altogether to allow as many transactions through the gate. There are simple ways merchants can do to optimize their mobile conversions while protecting customers such as:
- saving customer details
- requiring Card Verification Value (CVV)
- encouraging users to opt into receiving real-time alerts
- implementing multifactor authentication
Have a multi-layered defense system
Implementing an automatic multi-layered fraud defense system that focuses on m-commerce transactions. Watching out for changes with mobile carrier information, GPS location, and implementing advanced behavioral analytics can all be used to inform your decisions, decrease chargebacks, and increase revenue.
Consider setting order value limits
Based on your order and revenue trends, set limits for the number of purchases and total order value you’ll accept from one account. No one knows your business better than you, so you know who is your big-ticket customers and to give them certain allowances.
Arm yourself with knowledge
There's no quick fix to fraud. Keeping up to date on the latest trick’s fraudsters use and methods on stamping them out will shield against any undesirable business.