Reduce Your Risk of Mobile Payment Fraud

October 29th, 2014
in econ_news, syndication

Econintersect: Getting rid of cash is an alluring prospect for many. First off, let's face it, cash is filthy. A recent study done by New York University's Center for Genomics and Systems Biology showed that cash is full of bacteria - including the "bacteria related to pneumonia, food poisoning, gastric ulcers and staph infections."

Follow up:

Cash is also expensive to make. Think of the cost of the machinery upkeep, the materials and more to create each coin and paper dollar. In addition, criminals love cash according to Mashable. And the Federal Bureau of Investigations (FBI) says that "bank robberies accounted for $30 million in theft in 2011, a figure that doesn't include insurance fees or the 100 deaths or injuries that were related to those robberies that year. It might also put a dent in tax evasion, which has costs governments across the world as much as $3.1 trillion annually, according to one estimate."

Unfortunately, there are plenty of opportunities for fraud and crime in a cashless society as well. But as our society moves towards electronic currency, it's important to understand the different ways to protect your company and your customers.

According to Business News Daily, "A study by LexisNexis and Javelin Strategy & Research discovered that smaller mobile merchants — small businesses that accept at least one type of payment through either mobile browsers, mobile applications or mobile point-of-sale systems — rely on fewer fraud-prevention solutions, meaning they are often more exposed to deceptive schemes."

Fraud Prevention Options

Smaller merchants frequently only rely on only two types of fraud prevention techniques while larger companies rely on four or more. Business News Daily reports that companies, both small and large, need to use a variety of prevention techniques, including "such tools as PIN and signature authentication, check verification services, transaction and customer profile databases, browser/malware tracking, IP geolocation and real-time transaction tracking tools."

"Mobile payment options and point-of-sale hardware are providing more business opportunities for small merchants," said Dennis Becker, vice president of corporate markets and identity management solutions for LexisNexis. "Despite the surge in retailers using mobile payments to conduct business, we've found in our study the unfortunate correlation between the size of the business and the impact of mobile fraud on their business."

As mobile payment options providers such as Shopify and the amount of consumers using them increase, so do the amount of fraud cases with which merchants have to deal. For every dollar stolen through a fraudulent transaction, the cost of the transaction could cost the merchant at least three times as much. Chargeback fees, recovery, investigation and restocking lost merchandise all increase the cost to the merchant.

Ways to Prevent Fraud

1. Verify both the customer, the card information and the device. Talk with your mobile merchant solutions provider about how to verify the purchases where the card is not present. This is the base for many fraudulent transactions.

2. Combine your mobile app with authentication techniques such as fingerprinting to keep accounts secure.

3. Track each transaction by payment channel. This keeps mobile transactions separate from online transactions so that you know from where your money is coming and can track fraud if and when it happens.

4. Employ visual scanning technologies to verify identify. According to Iian Oosting of Mobile Payments Today, "Visual scanning technologies such as those employed by Jumio or can be used to verify your identity along with your electronic signature.

"These technologies are secured by a number of back-up layers to prevent identity theft. In Jumio’s case, rules can be set based on normal customer behavior. Jumio’s Fraud Detection Suite can look into a number of parameters, from the number of transactions coming from a specific card, or the amount of transactions and where they are coming from based on the IP address they were sent from."

5. Use electronic receipts with QR codes or NFC validation to verify the validity of receipts. Combining the receipts with visual scanning technology or electronic signatures can further prevent fraud.

Encourage Your Customers to Be Safe

Show your customers that their safety is important to you by encouraging them to password protect their phones. In addition, encourage customers to encrypt their private data through their smartphones so that even if they lose their phone, no one can access the private data within.

It is important for businesses to keep up with the ways consumers are choosing to spend their money. Businesses who fall behind the technology curve often find their customers looking for alternatives in order to make their lives easier. However, keeping up with the technology curve means keeping up with ways to protect your customers and show them that you care about their accounts as much as you care about your own.

"Retailers are quickly adapting to customers who are increasingly wired, self-sufficient and seeking convenience," John Aloysius, associate professor of supply chain management at the Walton College, said in a press release. "Given the retail focus of the Walton College, we look forward to discovering what this impact will be and to helping our industry partners."

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