Small mobile merchants more prone to fraud, study says

Small businesses accepting mobile payments through mobile browsers, mobile point of sale systems or mobile applications are more prone to deceptive schemes, revealed a study by LexisNexis and Javelin Strategy & Research.

This is because small mobile merchants use fewer fraud technology solutions, employing an average of just two types. Larger businesses use an average of four different types of fraud prevention technologies.

Fraud prevention technology includes tools such as check verification services, PIN and signature authentication, browser/malware tracking, transaction and customer profile databases, IP geolocation and real-time transaction tracking tools.

Consequently, larger businesses accepting mobile payments are able to prevent more fraudulent transactions than their smaller counterparts.

Although mobile payment options and point-of-sale hardware have provided small businesses with more business opportunities, the study found an “unfortunate correlation between the size of the business and the impact of mobile fraud on their business,” said Dennis Becker, LexisNexis’ vice president of corporate markets and identity management solutions.

The study highlighted that mobile fraudulent transactions resulted in almost three times the cost of the product stolen because the merchant typically incurred additional costs such as payment processing expenses and chargeback fees.

Meanwhile, 22 per cent of the mobile merchants polled believe that fraudulent incidents rose in 2013, compared with just six per cent who indicated that fraudulent incidents dropped last year.

The study also showed that one of the biggest threats faced by mobile merchants is credit card fraud. Nearly three out of five fraudulent deals were credit-card based.

Identity theft also poses a major problem for mobile merchants, with 21 per cent indicating that they have been a victim of fraud involving identity theft.

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