Mobile sales are increasing along with the adoption of mobile apps by retailers, but mobile fraud is a growing problem as well according to a new research report from Kount.
The whitepaper – “Mobile Payments and Fraud: 2018 Report” – identifies several key trends including growth in mobile sales, shifts in mobile payment options, marketplaces adopting mobile sales fastest and the latest mobile fraud prevention and fraud management tools.
Mobile revenue is growing
17% of merchants surveyed said more than half their revenue comes from mobile sales, up from 10% last year and only 3% in 2015. Nearly one-third of merchants expect mobile to represent at least half of their total revenue by 2020.
Higher revenue merchants are more likely to say the mobile channel is very important to their overall strategy (63%) compared TO lower revenue merchants (44%).
Support for mobile channels has leveled off; apps growing
The share of merchants who currently support the mobile channel has declined for two consecutive years, returning to levels observed in 2015.
The report offers several other key observations on mobile channels:
- The share of merchants who currently support the mobile channel has declined for two consecutive years, returning to 2015 levels.
- Nearly 90% of higher revenue merchants support the mobile channel today, compared to two-thirds of lower revenue merchants.
- Higher revenue merchants are more likely to support mobile apps whereas lower revenue merchants are more likely to support a mobile-optimized site, and both are as likely to support desktop e-commerce payments.
- Merchants are considerably more likely to support mobile apps compared to last year, 60% support mobile apps for online and 25% support mobile apps for in-store shopping. This compares to 44% and 13% last year.
Biggest industries supporting mobile
There’s a wide range of support for mobile channels depending on which industry you examine. The strongest industry supporters for mobile include: dating/social (90%), pets/toys/sporting goods (87.5%), health/beauty (86.2%), kitchen/home furnishings (85.7%), automotive/power sports (84.6%), and apparel/accessories (84.4%).
Industries least supportive of mobile channels among those surveyed include: professional services (50%), digital streaming/downloads/education (57.1%), not-for-profit (60%), banks/credit union/lenders/insurance (62.5%), and food/beverage (66.7%).
Those least likely to support mobile in the future include banks/credit union/lenders/insurance (25%), money movement/money transfer (25%), jewelry (12.5%) and kitchen/furnishings (10.7%).
Nearly 90% of merchants surveyed support desktop web browser payments but just over half (52%) currently offer a dedicated mobile website. Nearly half of merchants plan to add or increase support for desktop web browser payments compared to 37% who plan to add or increase support for their mobile site.
Which payment channels are supported now?
For the first time, merchants in the survey supported mobile apps for online shopping than a dedicated mobile site for online shoppers.
Several key channels grew in support according to the report:
“Merchants currently supporting a mobile website increased from 47 to 52%, but those currently supporting a mobile app for online shopping grew from 44% in 2017 to 60% this year. The share of merchants who currently support mobile apps for in-store shopping nearly doubled from 13 to 25%, while support for Near-Field Communication (NFC) and other mobile payments at the physical point-of-sale increased from 29 to 37%.”
International mobile payments are not really on the radar yet.
35% of merchants say less than 10% of mobile payments are from abroad. Only 31% of merchants say more than 10% of their mobile channel orders are international, while 25% didn’t know and 10% don’t track this data.
Mobile wallet trends
The report found some interesting trends in mobile wallet acceptance. Venmo and Square Cash were new additions for many merchants this year while SoftCard and MCX CurrentC acceptance dropped.
Acceptance of Apple Pay dropped from 48% to 35% while Google Pay declined from 38% to 25%.
Samsung Pay, Visa Checkout, MasterPass and Chase Pay all stayed constant from last year while AMEX Express Checkout grew from 9% to 16% of merchants. Merchants also increased support for PayPal while 10% accept AliPay and 10% accept other e-wallets.
Mobile fraud growth
The survey of merchants showed the biggest concern for merchants was ease of use (53%), followed by security and fraud risk (38.9%) and offering multiple payment options (11.9%).
Several key trends were noted in the report. Just 50% of merchants believed different fraud detection tools were needed for mobile compared to desktop and only 17% had a separate mobile fraud detection program.
50% of merchants said mobile fraud grew in 2017 following 70% growth in 2016.
Higher revenue merchants were more likely to have separate mobile fraud strategies and use up to five fraud detection services or tools. By comparison, lower revenue merchants were less likely to have separate mobile fraud strategies and used an average of 2.85 fraud detection services or tools.
The report noted several fraud detection strategies and weaknesses:
“The top three most used tools or techniques for mobile fraud detection are Address Verification (AVS), velocity checks and Card Verification Value (CVV) checks, two of which (AVS and CVV) are not very strong in terms of fraud detection.”
Is mobile fraud a higher risk than desktop?
Nearly 50% of merchants felt desktop fraud was their biggest risk while 21% believed mobile fraud was the biggest risk. 38% of merchants considered mobile fraud to be a bigger risk than desktop fraud.
In 2017, 25.1% of merchants considered mobile fraud a bigger risk than desktop while 38.2% believe mobile fraud is a bigger risk in 2018.
Is mobile fraud growing?
An estimated 34.8% of merchants did not know or could not detect mobile fraud over other fraud. 58% of merchants could detect mobile fraud said it was definitely higher in 2018 than the previous year. Another 34% of merchants said mobile fraud was at the same level as last year and 8% said it was down from the previous year.
Does mobile fraud need special tools?
50% of merchants said no special tools or services were needed to prevent mobile fraud while the other half believed this was necessary.
Just 28% of merchants with less than $10 million in revenue believed they needed specialized mobile fraud prevention tools compared with 63% of large merchants who believed special mobile fraud prevention tools were needed.
Surprisingly, 59.8% of merchants believe there is no difference between desktop and mobile fraud prevention strategies. Another 23.4% did not know and only 16.7% believed different tools were needed.
52% of merchants said they are using third-party fraud detection and prevention tools or services. One third manage mobile fraud in-house or do not manage it while another 15.7% did not know.
Nearly 90% of merchants are using some kind of tools or services to detect mobile fraud. The report concludes there is work to be done to improve mobile fraud detection:
“The technique most commonly used in the mobile channel is the CVV or card verification value check, a data point that many fraudsters have compromised with the card. Fraud scoring is the next most common risk management service utilized in the mobile channel, followed by Address Verification Services (AVS), which like CVV checks, can miss a lot of fraud attempts where this information is compromised along with the payment card being used.”
More than 83% 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% 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 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.
AI learning in fraud risk management has grown from just 5% in 2015 to more than 18% in 2018. Geolocation grew from 9% to 22% in the same timeframe. The most popular fraud detection tools – CVV checks, fraud scoring and AVS – remained at the same level of use among merchants.
Report available at no charge
All in all, it’s a valuable report for merchants with the latest in mobile payment trends and particularly useful insights into mobile fraud management.
Download the Kount Mobile Payments and Fraud: 2018 Report here.
Data visuals courtesy of Kount