The freshness of mobile transactions has become both an asset and a pitfall. Mobile payments are on the rise. The ease of use and excitement of convenience allow for shoppers to feel differently about spending money. The ability to use an app on their cellphone that's already in their hand makes making payments not only easy, but a new, modern experience as well. However, with the growth of mobile transactions comes the growth of mobile fraud, and the freshness of the platforms makes for less security than anywhere else.
As is true in many aspects of payment security, small businesses are at a disadvantage when it comes to protecting themselves from fraudsters on mobile platforms. Protection is expensive in more ways than one. The costs are high to prevent fraudsters from gaining access, and they’re even higher if they get away with earned revenue. It's vital to the success of emerging businesses that they prevent fraud in every aspect of payment processing.
For m-commerce merchants, consider these steps to prevent mobile fraud:
- Know your customer. Merchants should identify the cardholder and their mobile device, and then verify again. Double check. Be certain. By authenticating the connection of card and device to the same cardholder, merchants can greatly cut back on criminal fraud. Tools such as geolocation and velocity controls allow merchants to get to know their customers in a more detailed way.
- Don’t simply rely on card verification values (CVV). CVV are an industry staple when processing payment cards. However, they use an easily compromised numerical code to prove authenticity. While CVV codes are useful because they add an additional piece of information necessary to complete a transaction, they're simply not enough when it comes to mobile payments.
- Implement PIN usage. The use of PIN number authentication on a different band of communication provides an added layer of protection from identity theft and criminal fraud. Examples of this include SMS messaging or online-based applications that allow cardholders to verify usage for a second time.
- Enable device fingerprinting. Device fingerprinting software collects information that identifies individual mobile device users based on their unique fingerprints. This added level of security is also used to crack down on credit card fraud. Device fingerprinting doesn't add complications at checkout, and provides protection without confusion.
- Employ 3D Secure. The 3D Secure protocol may add an extra step to checkout, but by looping the cardholder’s issuer into the authentication process, the cardholder is that much safer. For every transaction that protects the cardholder from fraud, it in turn protects the merchant from “unauthorized transaction” chargebacks.
The most important thing m-commerce merchants can do to achieve a frictionless yet ultrasecure checkout process is to figure out what works specifically for them and their customers. If their customers don't respond positively to 3D Secure forms, there may be an alternative front-end security platform that they would be more accepting of.
It's important for merchants to expand their view on what really is costing their business as far as potential revenue goes.
While the cost of accepting mobile payments may seem high, and the cost of protecting both themselves and their customers from fraud may seem even higher, the cost of fraud can truly destroy a retailer's business. Mobile fraud can not only damage a company’s potential revenue and business reputation, but chargebacks can steal earnings already in the bank.
Monica Eaton-Cardone is the co-founder of Chargebacks911, a dispute mitigation and loss prevention firm.
Related story: 10 Tips for Online Merchants to Combat Holiday Chargebacks