[April 15, 2015] |
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Merchants Lag behind Mobile Growth, Study Finds
As the mobile commerce channel continues to surge, a new study finds
that merchants are not keeping pace with growth when it comes to fraud
and mobile payment adoption. Conducted for the third consecutive year by
Kount, Inc., CardNotPresent.com and The Fraud Practice, LLC, the 2015
Mobile Payments & Fraud Survey analyzes fraud and the mobile
channel, uncovering trends in payments, new technology adoption, and
fraud prevention strategies. Conducted from November 2014 to January
2015, the Mobile Payments and Fraud Survey had 2,000 survey respondents
among different industries that are active in payments, risk management
and the mobile channel, including merchants, service providers, card
issuers, acquirers, and card associations.
The survey found that merchant awareness is not keeping pace with mobile
fraud growth, and the support for the mobile channel is not meeting
predictions and expectations as reported by respondents in previous
years' surveys. In addition, concerns over the implementation around new
payment methods such as Apple (News - Alert) Pay have risen. What's more, while new
tools are available to merchants to meet increased fraud, there is very
little consistency in adoption of these tools across industries.
"The data shows that the industry as a whole is further behind on mobile
adoption and fraud protection than they were a year ago, and in fact,
some are even pulling back from it," said Don Bush, vice president of
marketing at Kount. "It seems everyone knows that mobile is finally
poised to make an impact, but the urgency to make sure mobile fraud
protection is in place is lacking. To successfully support the growth of
mobile, organizations must first ensure IT departments are talking with
fraud teams to understand risks and rewards or mobile fraud will grow to
a bigger issue in the coming years."
Exponential growth has led to many organizations' confusion about best
practices in payments and fraud mitigation. This may be one reason there
appears to be a slight slow down in adoption and policies surrounding
the mobile channel.
"As barriers to mobile adoption continue to fall and mobile payments of
all kinds surge, a green field is emerging for fraudsters," said Steven
Casco, CEO of CardNotPresent.com and
the CNP Expo. "What was once not worth their time is becoming very
lucrative and companies throughout the e- and m-commerce ecosystem are
just beginning to understand how vulnerable they actually are. This
report is the most comprehensive treatment of attitudes toward the
mobile channel available, examining how merchants and service providers
are trying to protect it and how fraudsters are attacking."
"Overall, organizations are earning more revenue and implementing new
solutions to meet the needs of customers and merchants in the mobile
channel," said David Montague, president and executive consultant, The
Fraud Practice, LLC. "At the same time, there is a noticeable shift from
a focus on risk management to managing the complexity of payment methods
and channels, including mobile wallets and mobile point of sale
payments. Organizations must work to find a balance in managing both as
the industry continues to make strides in all aspects of mobile channel
development."
Survey findings include:
Uncertainties Abound:
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Nearly half of organizations surveyed (40.8%) said they are uncertain
if fraud increased following a major data breach and over half (60%)
of respondents are uncertain if mobile fraud is growing at a faster,
slower or equal pace as their overall mobile transaction volume.
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Less than 40 percent (39.7%) of organizations an detect if a customer
is transacting from a mobile device, and only 17 percent can determine
the type of mobile device.
-
Mass merchants are most likely to identify mobile devices by type
(45.5%), whereas zero percent of insurance companies surveyed
could determine if transactions are coming from a mobile device at
all.
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Gaming/social sites are the only merchant category able to
identify all transactions that come
from mobile devices, but only one-quarter (25%) can determine the
device type.
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Less than 40 percent (39.4 %) of merchants surveyed track fraud by
channel and differentiate it from standard ecommerce transactions
overall.
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Organizations are split on where the fraud originates, as 32 percent
indicated mobile fraud was coming from domestic transactions, while 31
percent stated most mobile fraud comes from international sources.
Mobile Fraud Risk Factors Are Misunderstood and Not Prioritized:
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While mobile fraud is on the rise, more organizations consider the
mobile channel equally as risky as, or less
risky than standard ecommerce -- 41.4 percent and 7.8 percent
for both citations in 2013, and 48.4 percent and 10.4 percent in 2015,
respectively.
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Meanwhile, the share of merchants that believe mobile commerce is
somewhat or far riskier than traditional ecommerce both declined, by
about 6 percent and 4 percent, respectively.
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One-quarter (24.2%) of respondents feel mobile requires specialized
fraud tools, a decrease from 2013 (32.2%).
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Nearly one-third (28.4%) of merchants plan to add NO additional tools
or services to combat mobile channel fraud.
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At the same time, more than 37 percent plan to add mobile POS systems;
27 percent plan to add mobile apps for online shopping; and 18 percent
plan to create dedicated mobile sites.
New Payment Methods Spike Implementation Concerns:
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The number of merchants that consider managing the complexity of new
payment types the biggest obstacle to mobile adoption more than
doubled to 20 percent in 2014 from eight percent in 2013, and has
tripled since 2012 (6.5%).
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Consumers are using various payment methods for mobile transactions:
credit cards are the preferred method (62.6%), but PayPal (News - Alert) (13.5%) is
almost as popular as paying with a debit card (14.5%).
-
Consumers payment methods vary by merchant category: alcohol/tobacco
customers are most apt to use debit cards (42.9%); direct response
customers are most apt to use PayPal (66.7%); financial services
customers are highest users of prepaid/gift cards (12.5%); and
dating/social site users are most apt to use Bill2Phone offerings
(16.7%).
Mobile Wallet Adoption Spurred by Apple Pay:
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Less than one quarter (23.7%) of merchants accept mobile wallets,
which is the lowest amongst all respondent groups. PayPal is the most
accepted form of mobile payment, more than credit cards and debit
cards, accepted by 54 percent of merchants.
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While Apple Pay launched less than six months ago, it already has
equal levels of merchant acceptance as Google (News - Alert) Wallet; both are
accepted by 32 percent of merchants that accept mobile wallets.
However, support for Apple Pay (42%) by service providers and
non-merchant organizations already exceeds that for Google Wallet
(39%).
Fraud Protection Strategies Inconsistent:
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Respondents are uncertain if fraud tools can be used across channels,
with nearly one half (47.4%) reporting that ecommerce fraud processes
and tools can't support mobile fraud risk management completely.
-
Merchants are employing more tools and services to combat mobile
fraud, as 79 percent overall say they are using one or two tools while
only 40 percent of merchants listed just one service; the number rises
to three for merchants with greater than $50M in revenue.
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Across all organizations, the top three tools for preventing fraud in
the mobile channel are reported to be ID authentication (49%), device
ID (48%), and secure mobile payment methods (44%).
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While it is still the most commonly used tool fraud prevention
tool by all merchants in 16 different industries, identity
authentication use declined in 2014 (38.2%) from 2013 (41.7%).
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There are nine industries where at least one-third of merchants
use Device ID to prevent mobile fraud, including more than
one-half of gaming merchants (57.1%).
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The top five most common tools or services used by merchants are ID
authentication (38.2%), Device ID (35.7%), secure mobile payment
methods (30.5%) rules engine (26.6%), and fraud scoring (24%).
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Use of fraud scoring increased year over year by 38 percent, and
the use of text messaging for fraud prevention has nearly tripled
in use, up from 7 percent in 2012 to 18 percent in 2015.
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Card Associations list fraud scoring in their top three (50%) and
acquirers listed NFC as a top three tool (25%). Card issuers were most
likely to consider mobile malware detection a top tool (22%).
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Mobile gelocation tools have also grown in use, now used by 9 percent
of all merchants, up from only one percent two years ago.
To download a free copy of the 2015 Mobile Payments & Fraud Survey,
visit http://info.kount.com/mobile-payments-reports-2015.
About the Survey
The Mobile Payments & Fraud Survey 2015 Report is the third annual
installment of this study conducted by Kount, CardNotPresent.com and The
Fraud Practice, LLC. The Survey was conducted from November 2014 to
January 2015, and highlights the growth, opportunity, obstacles,
preferences and priorities identified by over 1,500 payments and/or
fraud professionals. Respondents represented a variety of organizations
within the payments ecosystem, including Merchants, Service Providers,
Acquirers, Card Associations and Issuers from organizations of all
sizes, from those earning annual revenues of less than $5 million to
companies earned more than $50 million per year in revenue. Merchants
represented over half of all survey respondents, of which 59 percent
have annual revenues in excess of $50 million.
For more information on the companies conducting the research, visit www.kount.com,
www.cardnotpresent.com
and www.thefraudpractice.com.
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