Kount, a provider of fraud and risk management solutions, along with The Fraud Practice, today announced findings from the sixth annual 2018 Mobile Payments & Fraud Survey (MPFS), which measures the state of mobile payments and mobile channel fraud from each prior survey year.
In surveying nearly 600 merchants, the report found several major mobile wallets have lost traction, with the percentage of respondents accepting Apple Pay in 2018 down from 48 to 35 per cent, the most drastic decline of all mobile wallets, and Google Pay down from 38 to 25 per cent.
Since the inaugural MPFS was conducted in 2013, merchants have steadily reported an increased awareness of mobile fraud risks, however about 35 per cent of merchants still do not track mobile fraud or do not know whether mobile fraud attempts increased or decreased from last year. The share of merchants who say the mobile channel requires specialized tools for risk management is at the lowest recorded level in all six years of this study. Only half of surveyed merchants believe the mobile channel requires additional or specialized tools, compared to between two-thirds and three-quarters of merchants in each of the past studies.
“For the third consecutive year, merchants are showing signs of complacency and even regression in terms of managing mobile fraud risk,” said Don Bush, vice president of marketing at Kount. “Despite the increase in mobile fraud and the evolution of tactics carried out by criminals to commit fraud in this channel, the number of merchants implementing specialized tools has decreased, demonstrating that merchants struggle to properly address fraud in the mobile channel including both apps and mobile browsers.”
Additional survey findings include:
More money, more…payment options
Support is up across the board for NFC (up from 29-37 per cent) and other mobile payments at the physical point-of-sale, while 26 per cent of merchants plan to increase or add support for social commerce (purchases made directly through social media channels such as Instagram, Twitter etc.) this year, and merchants’ support for mobile wallets climbed from 22 to 29 per cent. However, this increase in choice and support comes at the detriment to specific mobile wallets:
- Most notably, merchant support for Apple Pay has gone down from 48 per cent to 35 per cent;
- Google Pay (previously Android Pay), is down from 38 per cent to 25 per cent;
- Support for PayPal increased from 48 per cent to 64 per cent while 10 per cent accept AliPay and 10 per cent accept other e-wallets;
- The share of merchants who accept Samsung Pay, Visa Checkout, MasterPass and Chase Pay all stayed constant from last year, while AMEX Express Checkout enjoyed the biggest gain in support, growing acceptance from nine per cent to 16 per cent of merchants.
Mobile pains and gains
As is typical for any emerging technology, commerce in the mobile channel has faced its fair share of growing pains, from issues with ease of use to payment processor compatibility in mobile apps.
The most commonly cited challenges by mobile channel merchants today include:
- Maintaining ease of use for the consumer (60 per cent);
- The ability to detect fraudulent order attempts (52 per cent);
- Nearly one-third of merchants surveyed believe the mobile channel will represent at least half of their total revenue by 2020.
Of the merchants who track abandonment rates:
- About 42 per cent report a mobile checkout abandonment rate of less than 20 per cent;
- 25 per cent say their abandonment rate is more than 40 per cent;
- 11 per cent say their abandonment rate is at least 60 per cent.
Channel risk: Varies by vertical
About half of merchants (49 per cent) stated that traditional e-commerce, consumers shopping from desktop browsers, is still their highest risk channel. Mobile web browser transactions are the next most likely to be considered the highest fraud risk, as indicated by about 21 per cent of merchants, followed by 18 per cent of merchants who say mobile app payments are the highest risk. However, this varies by vertical:
- More than 75 per cent of financial institutions, lenders, and food and beverage merchants, say mobile fraud attempts increased last year;
- More than two-thirds of digital streaming/download, health/beauty merchants and dating social sites say the same;
- More than 38 per cent of merchants overall consider the mobile channel higher risk than desktop e-commerce, or 43 per cent of merchants when excluding those who don’t support the mobile channel today. This is up from just over 25% of merchants last year, and back in-line with what merchants reported in 2015 and 2016;
- Money movement or remittance organizations are the most likely to report the mobile channel as being highest risk, as half of these merchants list either mobile app or mobile web browser transactions as the highest fraud risk;
- Dating and social sites (80 per cent) and health/beauty merchants (73 per cent) are the most likely to say desktop web browser transactions are the highest fraud risk;
- Just 17 per cent of merchants definitively state they have separate risk management strategies for mobile versus desktop e-commerce channels;
- More than 35 per cent of each digital download or streaming, hardware/home improvement, and jewelry merchants indicated mobile app or mobile web browser transactions are their highest risk channels.
Among the industries prioritizing mobile, merchants selling jewelry (71 per cent), electronics and computers (63 per cent), health/beauty products (63 per cent), and apparel or accessories (56 per cent) are the most likely to consider the mobile channel very important to their overall strategy. The mobile sales channel increased as a source of total revenue once again after remaining stagnant last year, while mobile sales as a portion of total revenue have grown significantly since 2013.
The percentage of merchants who earn the majority of their revenue via mobile channels grew five-fold between 2015 and 2018:
- Just two to three per cent of merchants earned more than half of their total revenue in the mobile channel between 2013 and 2015, compared to 17 per cent of merchants earning much of their revenue in the mobile channel today;
- Nearly one-third of merchants surveyed believe the mobile channel will represent at least half of their total revenue by 2020, while 60 per cent of merchants say the mobile channel will represent at least 30 per cent of their total revenue by then.
Few merchants in fraud-fighting shape
The majority of merchants surveyed (52 per cent) indicated using third party tools or service providers to manage risk and detect fraud in the mobile channel, while one-third do not use third party services, either managing mobile channel fraud entirely in-house or not managing it at all. And 15 per cent of respondents were uncertain, suggesting little or no fraud prevention strategy. The most-utilized risk management tools for detecting fraud in the mobile channel include:
- CVV or card verification value check (62 per cent)
- Fraud scoring (43 per cent)
- Address verification services (AVS) (39 per cent)
Although steadily increasing over the years, less than 20 per cent of merchants are making strides by adopting one of the most effective fraud fighting tools available to merchants. AI/machine learning was utilized by just five per cent of merchants for mobile channel transactions in 2015, compared to more than 18 per cent of merchants today.
The ability to detect transactions coming from mobile devices has grown considerably since the inaugural Mobile Payments and Fraud Survey, from just 16 per cent of merchants who could detect and differentiate between types of mobile device in 2013 to 46 per cent of merchants with this capability today.
While the share of merchants unable to detect when a transaction is coming from a mobile device increased to 27 per cent from 14 per cent last year, this is still significantly lower than the 55 per cent of merchants overall who were unable to differentiate desktop e-commerce from mobile e-commerce in 2013.
More than half of merchants (52 per cent), can tell which mobile operating system is in use (iOS, Android, Windows, etc.), while 46 per cent can differentiate the specific type of mobile device, for example whether the consumer is using a smartphone or tablet.
Tech, tools, and techniques
More than 83 per cent of merchants are using two or more fraud prevention tools or techniques in the mobile channel, while two-thirds are employing three or more, and 25 per cent are utilizing seven or more tools or services.
One-in-three merchants use identity authentication in the mobile channel, while about one-in-four are currently using velocity checks, device identification, and a rules engine.
Mobile geolocation and 3D secure consumer authentication programs like Verified by Visa and MasterCard SecureCode are each used in the mobile channel by about one in five merchants.
“It’s been remarkably insightful to compare data across the six years of this study, enabling us to monitor trends around support for mobile commerce and risk management as well as areas of weakness and concern expressed by merchants over this time,” said Justin McDonald, senior risk management consultant at The Fraud Practice. “While merchants are more likely to distinguish between a mobile and desktop transaction today than they were two years ago, fewer are taking the next step to secure the mobile channel with a dedicated fraud strategy. Although mobile fraud attempts increased for 60 per cent of merchants last year, just 17 per cent employ a separate risk management strategy for the mobile channel.”