Stats Show mCommerce Continues to Increase Both Profits and Risks
The popularity of mobile commerce is flourishing. Consumers are gaining confidence in mCommerce security and have come to rely on mobile’s ease of use. Businesses appreciate this new revenue channel and are eager to take advantage of its many profitable opportunities. However, fraudsters are also drawn to mCommerce, identifying mobile channels as the point of least resistance.
Consumers Appreciate Mobile Commerce
The popularity of mCommerce is directly proportional to the prevalence of mobile devices. Ninety percent of American adults have a cell phone. Of those, 77% are smartphones. Additionally, 51% of American adults own a tablet.
Tim Cook, Apple CEO, reported more than 1 million credit cards were activated with Apple Pay within just 72 hours of the mobile wallet’s launch. Banks immediately jumped on board to support the alternative payment option. Wells Fargo offered a $20 statement credit to any of their cardholders who used an iPhone 6 to make an Apple Pay purchase in November, 2014.
The introduction of Apple Pay and near field communication (NFC) for card-present retailers has created a shift in opinions regarding card-not-present (CNP) transactions. More and more consumers rely on their mobile devices to make purchases. Mobile is becoming the norm for both in-person and online shopping.
Merchants Benefit From mCommerce
Merchants are also benefiting from the explosion of mCommerce popularity. Consumers now have the ability to shop anywhere, creating a drastic boost in sales.
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Fraudsters Like Mobile Commerce Too
Sadly, fraudsters tend to go where the revenue sources are too. Of all the payment channels, mobile has the least fraud protection. Mobile commerce merchants are the easiest target for fraudsters—and their susceptibility to fraud will only get worse.
Once card-present merchants make the transition to secure EMV cards, criminals will look for new venues to perpetrate fraud. Online fraud could spike as much as 79% once card-present fraud opportunities have been blocked.
Interviewing 250 enterprise-level businesses revealed an average of $92.3 million in annual revenue loss was attributed to mobile fraud. Between 25% and 49% of fraud is linked to mCommerce, but less than 20% of transactions happen on mobile devices.
The Implications of Fraud
The largest portion of fraud profit losses result from chargebacks. Each dollar of fraudulent transactions costs mCommerce merchants $3.34. In total, fraud costs merchants approximately $32 billion each year.
Criminals aren’t the only ones taking advantage of loopholes in the mCommerce payment ecosystem; friendly fraud flourishes too. Consumers are aware of the inability to confidently verify the identity of a shopper or their device. In fact, it's estimated 24% of mobile fraud transactions are executed by cardholder’s friends and family.
How to Reduce mCommerce Fraud
To be successful, mCommerce merchants need to focus their attention on two tasks: preventing fraud and increasing sales. First, let’s look at the best mobile commerce criminal and friendly fraud prevention strategies.
Generally, merchants choose one of three forms of ID authentication:
- Request something the consumer has (like credit card information)
- Request something the consumer knows (like a PIN or password)
- Request something the consumer creates (like a fingerprint)
Authenticate the Device
Check to see if the device has been used to successfully complete a previous transaction. Also, check to see if the device has been used previously for fraud.
Authenticate the Telephone Number
Identify the device (mobile, landline, VoIP, etc.) associated with the telephone number listed with the transaction. Some devices are more inclined to fraud.
Consult Mobile Geolocation
Consult the mobile geolocation information. Does the current location match the AVS data entered for the transaction?
Remember, fraud and chargeback prevention demands a dynamic, evolving approach. Fraudsters are constantly adapting their techniques; your prevention efforts must match the evolution. There isn’t a universal approach for either fraud prevention or chargeback representment. If you’d like help creating a customized mCommerce fraud prevention plan, let us know. Contact us today; we'll help you start preventing unauthorized transactions within 24 hours.
How to Increase mCommerce Profits
The average cart abandonment rate is just over 68%. However, mCommerce merchants experience a much higher rejection: 99.5% of mobile users abandon their cart before completing the purchase because of friction in the checkout process.
It doesn’t matter if customers are leery of security or feel burdened by the checkout process, there is lots of room for improvement for mobile commerce merchants.
- Keep the payment form short and simple.
- Reduce visual clutter whenever possible.
- Don’t use special fields for credit card information that forces hyphenation.
- Auto-populate fields when possible.
- Don’t require shoppers to create an account. If they do want to log into an account, make sure payment information is saved.
- Create a payment page design that is consistent with the rest of the site. Don’t let visitors think they’ve inadvertently accessed something suspicious.
- Prominently display security badges (preferably close to the credit card information fields).
- Offer multiple payment options (PayPal, Google Wallet, Apple Pay, etc.).
- Don’t ask for the city and state. Ask for the zip code and automatically fill those fields.
- Make sure data entry fields are large enough for “fat fingers.” Design large buttons too.
The more payment channels a merchant uses, the more potential for profits; however, the risk of fraud also increases. With adequate attention to both profit optimization and fraud reduction, mobile commerce merchants can avoid chargebacks and ensure their business’s longevity.