Merchants have progressed with mobile security, but almost 70% of those surveyed have not made changes to their fraud prevention following a breach, even though many fear consumer perception.
Boise, Idaho-based fraud-detection firm Kount’s 2017 Mobile Payments & Fraud Survey, conducted in association with CardNotPresent.com, Braintree, a PayPal company, and The Fraud Practice, measured the state of mobile payments and mobile channel fraud. The fifth annual report surveyed more than 800 merchants from 29 vertical industries and ranging from under $5 million to more than $500 million in revenue from April 2017 to June 2017.
Among the findings: only a small fraction of merchants (8%) believe mobile channels are far riskier than traditional e-commerce, down from 14% last year. Merchants also remain fairly trusting of mobile wallets, with more believing that fraud will decrease rather than increase as consumers adopt mobile wallets more widely (37% vs. 29%, respectively).
Five years ago, more than 55% of merchants were unable to detect whether a transaction came from a mobile device but only 14% of merchants report this inability while 28% of merchants are unable to tell if a mobile transaction originated overseas.
“This survey has shown that merchants have made a lot of progress over the years when it comes to their commitment to mobile payments and fraud detection technologies,” Don Bush, VP marketing at Kount, said. “However, card-not-present fraud rates will continue to grow alongside rising online and mobile commerce so it’s important that merchants not become complacent in their security efforts, but rather research specific tools.”
The survey also examined merchant opinions regarding the payment systems and platforms associated with mobile risk, finding that 60% believe browser-based mobile payments are those at the greatest risk of fraud.
Although only 25% of merchants said the ‘mobile channel’ is a higher risk than web e-commerce, nearly 40% of merchants indicated they have seen a mobile channel fraud increase. One-in-four merchants stated that mobile app-based payments are at the greatest risk for fraud with 14% saying mobile contactless payments face the highest fraud risk.
The report also examined where most organizations stand on data breaches and public sentiment, finding most merchants (68.4%) have not made changes to their fraud prevention following a data breach, even though more respondents said consumer perception was the most damaging aspect of a breach.
According to Bush, “With the majority of merchants reporting no changes to their fraud prevention practices after a breach, they are leaving themselves open for recurring (and many times preventable) fraud attacks.”
Merchants rated the following as the most damaging aspects of a data breach:
- Consumers’ perception of weak security (44%)
- Loss of personal data (20.4%)
- The fact that fraud results from a breach (15.6%)
- Loss of financial data (13.2%)
- Uncertain (6.8%)
Since the initial Mobile Payments and Fraud Survey, merchants have nearly doubled their mobile payments options online and in-person: the percentage of merchants who support a mobile app for online shopping has more than doubled (from 21% in 2013 to 44% in 2017); the acceptance of mobile payments at the point-of-sale nearly doubled (from 15% to 29%); and mobile apps supporting in-store shopping experiences nearly tripled (from 5% to 13%).
Merchants have also improved their device detection abilities: five years ago, more than 55% of merchants were unable to detect whether a transaction came from a mobile device, but now only 14% of merchants are unable to determine the device.
Regardless of the influx of new mobile wallet options, merchants have been slow to adopt the payment method (with only 22% of merchants accepting mobile wallets) – perhaps because most merchants (70%) anticipate consumer mass adoption of these mobile wallets still two to five years away.
Top mobile-only payment methods accepted from mobile devices include:
- Credit card: 97%
- Debit card: 79%
- PayPal: 56%
- Gift card: 36%
- Prepaid card: 33%
- Mobile Wallet (including Apple Pay): 22%
