Mobile Commerce: How to Increase Profits and Decrease Risks
Mobile commerce—or mCommerce—is currently the fastest-growing channel for generating sales revenue. Most businesses are eager to take advantage of its many profitable opportunities.
Unfortunately, new opportunities reliably attract an influx of fraudsters. Many of these criminals see mobile channels as the weak link in the consumer data chain…and in many cases, they’re not wrong. This begs the question: is the opportunity worth the risk?
Consumers Are Driving Mobile Commerce
As of early 2018, there were some 4.7 billion mobile users around the world. In the US alone, over 225 million adults have a mobile phone—just shy of 90% of the adult population—and that doesn't even count the under-18 crowd.
Mobile commerce encompasses more than sales involving a mobile device; increasingly, the mobile device is also the method of payment. By the end of 2018, 63% of all retailers are projected to accept Apple Pay; 51% will accept PayPal, and 49% will take Android Pay.
Mobile is the direction the retail world is headed, but it's all being driven by the shoppers. Consumers' demand for instant access has seen brands and stores across the retail spectrum scrambling to adapt to their target audiences.
Why the surge? The popularity of mCommerce is related to the increased number of devices, but also to the comparatively fast rise in the adoption of those devices. One 2016 study reported that more than 10% of American adults now access the internet through their smartphones only; for them, desktops are a thing of the past. Of course, there are other reasons, as well:
Mobile apps allow consumers to shop on the go, connect directly from social media, store loyalty card information, and more. Perhaps more importantly, it allows users to multitask; users can check email while in line at the coffee shop, or pay the electric bill while stuck in traffic. Consumers appreciate the fact that well-designed mobile apps are more straightforward and intuitive than their desktop counterparts.
Advanced mobile apps can customize the user experience more than ever before by tracking past purchases and browsing history. Apps make intuitive suggestions for products based on consumers’ interests, push coupons based on location or preferences, and can even keep track of personal measurements or other helpful data.
In a world defined by tweets and likes, mCommerce has the lightness and flexibility to adapt. Younger consumers, in particular, demand the latest technology, the latest trends, and instant access. mCommerce fits the bill perfectly.
Mobile is on its way to becoming the norm for both in-person and online shopping. Consumers are increasingly turning to their mobile devices to purchase, make payments or deposits, qualify for loans, and transfer money.
Having said that, it's worth noting that a recent study by DynamicYield revealed only 12% of consumers find shopping on the mobile web convenient. Despite mCommerce's current popularity, there is obvious opportunity for improvement.
Merchants of All Types Benefit From mCommerce
Mobile channels accounted for nearly $115 billion in sales in 2017, or almost 35% of all eCommerce sales. By 2020, experts conservatively predict mobile will represent 49% of eCommerce and bring retailers $252 billion in sales.
The dramatic rise in mobile popularity benefitted the retail sector, but has also helped to grow other industries, or in some cases, even created new ones.
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Fraudsters & Mobile Commerce
Mobile channels offer a lot of opportunity for new revenue sources. Sadly, fraudsters see all types of new opportunities with mCommerce, too.
Of all the payment channels, mobile has the least fraud protection. Right now, mobile commerce merchants are the easiest target for fraudsters, and their susceptibility will likely get worse before it gets better.
Ironically, the reason for the mobile fraud problem is we are getting better at fighting fraud. For example, brick-and-mortar merchants have made the transition to more secure EMV cards. As a result, online fraud could spike as much as 79% because card-present fraud opportunities have been effectively blocked.
Merchants lost $2.66 for every $1 stolen by criminals in 2017. But it's not just criminals who are taking advantage of loopholes in the mCommerce payment ecosystem: friendly fraud is flourishing too. In fact, the largest portion of fraud profit losses come from chargebacks.
It's been estimated that as much as 24% of mobile fraud transactions are executed by cardholder’s friends and family. Each of these has the potential to devolve into a case of family fraud.
While these statistics could put a damper on the enthusiasm surrounding mobile commerce, the reality is that there are steps merchants can take to protect themselves.
How to Reduce mCommerce Fraud
To keep a revenue stream sustainable, mCommerce merchants need to focus on two key areas: increasing sales and preventing fraud. Most merchants understand how to drive sales; they're often at a loss, however, when it comes to preventing fraud.
Calling in outside help is always an option; professionals can always bring knowledge and experience to the situation and relieve stress. At the same time, some effective mobile commerce criminal and friendly fraud prevention strategies can be easily understood and implemented by any merchant:
There is no single, surefire way to guarantee a shopper's identity, but using more than one method at a time offers fairly-reliable identification. Merchants can request any combination of something the consumer:
- Has, like personal data or credit card information.
- Knows, like a password, PIN, or a security question.
- Creates, including tokens, or even biometric scans.
Authenticate the Device
It’s always a good idea to check and see if the device attached to a transaction has ever been used to successfully complete a previous purchase. Conversely, this can also reveal if that device has ever been associated with fraud attempts.
Authenticate the Telephone Number
Some devices are more inclined to fraud. Now more than ever, it is important to attempt to identify the device (mobile, landline, VoIP, etc.) associated with the telephone number listed for a transaction..
Consult Mobile Geolocation
Current customer data can be cross-referenced against the caller’s location. Merchants can verify whether the device in a location that matches the AVS data for the transaction.
None of these suggestions are foolproof. Fraudsters are constantly adapting their techniques, and your prevention efforts must match their evolution. That’s why fraud and chargeback prevention demands a dynamic, evolving approach.
How to Increase mCommerce Profits
The average cart abandonment rate is just over 68%. That means that over 2/3 of online customers select items to purchase, but never actually make a final transaction.
That's bad enough, but mCommerce merchants have it much worse: 90% or more (some reports go as high as 99.5%) of mobile users abandon their cart before completing a purchase. This can often be traced back to friction in the checkout process.
But even if the abandonment rate for mobile was the same as that of eCommerce in general, mobile commerce merchants still have plenty of room for improvement. Fortunately, there are actions merchants can take to improve overall conversion:
- Keep the payment form short and simple.
- Reduce visual clutter whenever possible.
- Make it clear to consumers how they should format form entries.
- Auto-populate fields whenever possible.
- Don’t require shoppers to create an account, but always offer the option.
- If customers do want to log in, make sure all personal information is saved and secure.
- Offer multiple payment options (PayPal, Google Wallet, Apple Pay, etc.).
- Prominently display security badges, preferably near payment information fields.
- Create a payment page design consistent with the rest of the site.
- Make it clear any time customers are sent to a third-party site like Paypal.
- Make sure buttons and data entry fields are accessible.
Some of these items appear to contradict other things we've said in the post. Gathering as much information as possible to circumvent fraud, for example, might cause friction in the checkout process. At the same time, keeping your checkout page clean and clutter-free might make it hard to glean additional security information.
Remember: there is no one-size-fits-all solution. It's a matter of weighing potential risks, and that varies between businesses and industries. That's another good reason to consider professional help: it's the most efficient way for merchants to identify the particular mix that works for their industry.
Make Mobile Work for You
Merchants are under increasing pressure to create and maintain robust mobile sites, regardless whether they see a corresponding return on investment or open themselves up to increased fraud. It may seem like a no-win situation, but with adequate attention to both profit optimization and fraud reduction, mobile commerce merchants can drive sales, avoid chargebacks, and reduce their overall risk of fraud.
Click below and learn more about how you can mitigate your mobile commerce risks.