Mobile Payment Systems Pose Fraud Risk For Small Businesses
Small businesses that accept mobile payments are exposing themselves to risk by using too-few fraud-prevention systems, a new study reveals.
According to the report by LexisNexis and Javelin Strategy & Research, small businesses that accept at least one type of mobile payment--including through mobile apps, mobile point-of-sale systems, or mobile browsers--protect their business with fewer fraud-prevention solutions than larger companies.
Smaller mobile merchants on average only use two different types of fraud-prevention technology, while larger businesses use an average of four types, the study finds. Fraud-prevention technology includes tools like signature authentication, check verification services, transaction and customer profile databases, IP geolocation, real-time transaction tracking tools, and browser/malware tracking.
LexisNexis and Javelin Strategy & Research collected 1,139 surveys from risk and fraud "decision makers and influencers," including small and large companies that use a variety of payment methods.
The price small businesses have to pay for mobile payment fraud isn't small. The study found that fraudulent mobile transactions cost a business three times the value of the actual product stolen due to payment-processing fees, fraud investigation, and restocking stolen goods.
The lesson is that small businesses are big targets for fraudsters--attackers go for the weakest link, not the strongest. You need to protect your small business with more security measures if you use mobile payments systems.
Dennis Becker, vice president of corporate markets and identity management solutions for LexisNexis, said in a press release that mobile payments are a double-edged sword. "Mobile payment options and point-of-sale hardware are providing more business opportunities for small merchants," he said. "Despite the surge in retailers using mobile payments to conduct business, we've found in our study the unfortunate correlation between the size of the business and the impact of mobile fraud on their business."
Below are three prevention techniques the study suggests you implement at your company:
- Thoroughly authenticate transactions through mobile devices.
- Track fraudulent activities by each channel you offer. Currently, only 48 percent of mobile merchants reported that they track fraud by payment channel.
- Maintain open communications with financial institutions and other mobile merchants to better understand the evolving nature of fraud threats and solutions. Consortia such as the Merchant Risk Council provide forums for sharing expertise and assessing concerns.