Mobile Payment Risks
While mobile payment systems have clear advantages for businesses, they also come with a fair amount of risk.
To date, no federal laws or regulations specifically govern mobile payments. However, the laws and regulations that apply to traditional payment methods also apply to mobile payment. Businesses should be particularly conscious of the potential and perceived risk of fraud in mobile payments. Customers are more likely to adopt the use of mobile payments if they’re confident that the provider has taken appropriate steps to make this service secure by protecting their funds and confidential account information.
According to a study conducted by LexisNexis, small businesses lose more revenue to mobile payment fraud than larger businesses do because they’re less likely to protect themselves from fraud. Mobile malware is a constant danger to these businesses, as they may not employ a full IT staff to handle various cyber threats.
The LexisNexis study also found that 58 percent of the fraudulent transactions against the surveyed companies involved a credit card, while just 23 percent involved a debit card.
Identity theft is the most popular type of fraud associated with mobile payments. Criminals can effortlessly make purchases and get access to personal information on a lost or stolen smartphone. The whole point of mobile payment systems is to make it easier for consumers to buy things, but that also means criminals have the same ease of use.
The more popular mobile payments become, the more they’ll be targeted by hackers and thieves. And since the regulatory landscape is lagging behind with these types of payment methods, they’re not as safe now as they’ll be in the future.
Recommendations for Minimizing Risk
Here are five measures you can take to shore up the security of your mobile payment system:
1. Authenticate the identity of the consumer and his or her device when accepting card-not-present payments.
- Mobile apps are generally better at protecting customers’ personal data than mobile browsers.
- Two-factor authentication is the best way to prevent fraud.
2. Track fraudulent activity by payment type.
- According to the LexisNexis study, only 48 percent of merchant’s tracked fraudulent activity by payment type (online, mobile, in-person, etc.). It’s easier to identify trends and prevent fraud by using this method.
3. Report suspicious activity immediately to consumers and to your mobile payment company.
4. Make sure your payment systems are up to date at all times.
- Patching eliminates certain vulnerabilities. Also, make sure your business’ computers are patched regularly.
5. Have any visitors or vendors sign in.
The Target data breach that occurred during the busy 2013 holiday shopping season is believed to have been perpetuated by an HVAC vendor that was doing work for one of Target’s stores.
Mobile payments are becoming an increasingly important part of the payment landscape. Expect to see new types of payment options in the future, along with added security benefits and increased consumer confidence in the platform. Chat with us if you have additional concerns.
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