Mobile Commerce

Rising Mobile Commerce Fraud Costing Retailers

Mobile commerce fraud is costing retailers an average of 3 percent of their total revenues, and the faster m-commerce grows, the more fraud will cost, according to a study released Thursday (Feb. 5).

The study of 250 enterprises with revenues that average $2.54 billion also found that the average annual loss due to mobile fraud was $92.3 million. In some cases, mobile fraud was as much as 25 percent of a retailer’s mobile sales, the study performed for encryption vendor RSA and fraud-prevention vendor TeleSign found.

According to the Web-based survey, 8.4 percent of respondents said they hadn’t had any fraud losses due to online or mobile commerce, and another 34 percent said they lost 5 percent or less of e-commerce revenue to fraud. But 13.6 percent said they had online fraud losses between 6 and 10 percent, 15.2 percent had fraud of between 11 and 25 percent, 14.4 percent had fraud rates between 26 and 35 percent, and 11.6 percent said their online fraud rates were between 36 and 50 percent.

While average Internet fraud losses ran between 6 and 10 percent for most companies, the story was different for medium-size companies with revenues between $500 million and $1 billion. They averaged online fraud rates of 11 to 20 percent, the study found.

But for mobile fraud, only very small companies (less than $100 million) saw fraud rates below 10 percent. For anyone larger, the average was between 10 and 24 percent.

Despite the high loss rates and the fact that most of the businesses responding said fraud was on the rise, the majority also said that fraud on their websites and mobile apps “is quickly detected and remediated,” and that they have sufficient systems and processes in place to handle the situation. “This seems to be a clear disconnect between reality and perception,” the report’s authors — a team from J. Gold Associates — noted.

The new survey aligns painfully well with what other recent surveys have found: M-commerce has relatively high fraud costs, and as mobile expands, those costs will balloon rapidly unless retailers tighten security — and fast.

“Mobile security has a huge potential payback, likely returning 10 to 20 times or more of the investment. It must be on every organization’s high priority list for the coming one to two years to get things started now, and then continuously updated and enhanced for the foreseeable future,” the report said. “Those companies that do not make the required investment in enhanced mobile security will have sharply reduced revenue, as well as much higher costs of operations, and a dissatisfied customer base.”

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Latest Insights: 

Facebook is a giant in the ad game, with 2.3 billion active monthly users and $16.6 billion in quarterly advertising revenue. However, its omnipresence makes it a honeypot for fraudsters. In this month’s Digital Fraud Report, PYMNTS talks with Rob Leathern, Facebook’s director of product management, on how the site deploys automated systems and thorough advertiser vetting to close the lid on fraudster attempts.

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