An old proverb says, “A thief is a thief, whether he steals a diamond or a cucumber.” In the fast-developing world of ecommerce, fraud and theft has become a growing problem within an international community of merchants selling diamonds, cucumbers, and everything in between.
By 2021, mobile payments are estimated to reach an impressive US$3 trillion. With this growth – and the rapid growth of ecommerce as a whole – comes an unfortunate but not unexpected increase in international payment fraud.
A report published recently by Worldpay, Fraud Trends 2016, relates to this growing risk of fraud and provides actionable insights into some of the key issues: trends in mobile payment adoption globally, mobile payment fraud, social media authentication analysis, machine learning, and general reliance on data to combat fraud.
What are the major trends in fraud and how can Merchant Service Providers prepare for what lies ahead?Brace Yourselves, Growth in Mobile-based Fraud is Coming!
With the rapid growth in mobile payments, the volume of fraudulent and miscoded transactions funneled through mobile channels will also grow exponentially.
In addition to other types of fraud, transaction laundering through mobile channels is on the rise. Fraudulent merchants are using mobile apps to process payments for illicit purposes through legitimate merchant accounts. The volume of mobile transactions combined with the lack of adequate detection tools makes it almost impossible for the payment industry stakeholders to detect such activity.
When such transactions go undetected, Merchant Service Providers face tangible risks of heavy fines, legal action and damage to their overall reputation.
According to Worldpay’s statistics, based on analysis of data collected from about 200 respondents, 53 percent of merchants track mobile transactions and 59 percent believe mobile transactions involve an increased risk of fraud. Yet, only 33 percent treat these transactions differently.Mobile Payments Adoption is an Uneven Process
While mobile payments are clearly growing fast, the level of adoption is an uneven process, with some sectors and industries lagging behind the general trend. Look at the case of vacation purchases, for example – one area of ecommerce for which buying is still done primarily on the desktop, and not on mobile devices.
Another discrepancy mentioned in the report, is that growth relates to different geographic regions, with APAC displaying far greater rates of mobile adoption than other regions.
Merchant Service Providers who are active in the regions or sectors with high mobile payment adoption rates should take extra steps to protect themselves from transaction laundering on mobile channels.
That is precisely why we developed MerchantView, a fully automated solution that uses proprietary cyber intelligence technology to continuously monitor all aspects of merchant networks to identify, detect and prevent undisclosed activity from entering payments ecosystem.Utilizing Big Data in the Fight Against Fraud
Perhaps it is a no-brainer: Big Data is a crucial component of the fight against fraud.
Just one example of the growing importance of data that emerged from Worldpay’s survey relates specifically to non-card transactions – tricky from a fraud prevention perspective, since they involve the collection of a minimal data set. Worldpay found that 77 percent of merchants interviewed wanted additional data to help assess risk in non-card transactions.
The problem is, that this kind of data is frequently available internally, within an organization, but it is not fed into the fraud detection system. For example, positive customer data may be collected at sign-in by Marketing, and organizations may have records of purchase history or typical spend. But that data is not always shared. Better collaboration across teams may be required in order to facilitate more effective decision-making.
In considering different ways of better utilizing data, an increasingly relevant approach that cannot be ignored is the application of cyber intelligence machine learning techniques: through the automation of data analysis, it becomes possible to uncover trends and derive actionable insights.
One obvious issue, however, lies in avoiding the challenges presented by data overload. Companies that experience data overload are not able to identify fraudulent activities – despite having access to the necessary information. New technologies such as advanced machine learning algorithms and cyber intelligence techniques are needed to tackle the issue of “too much data” .
Detecting transaction laundering requires especially rigorous cyber-intelligence and big data processing techniques, as it is extremely difficult to find the hidden connections in the extensive pools of data available.Are your Ready for the Future?
There’s constant change in the area of payments technology, and an ongoing need to keep up with new developments. For example, two current trends in this area are the Internet of Things and invisible payments. As the technologies evolve, fraudsters become ever smarter at targeting those technologies.
According to Worldpay’s research, most merchants feel that the new solutions for fighting fraud will need to involve increased use of expansive data assets and integrated cyber intelligence techniques.
Preparedness is a big part of the future fight against fraud. According to Worldpay’s survey, 81 percent of merchants are worried that new types of attacks may emerge before technology has been developed that can fight them. Transaction laundering is one of such new feared fraud schemes, which is increasingly difficult to detect without a dedicated solution.One Step Ahead
In anticipation of current fraud trends, earlier this year, EverCompliant has become the first solution available to address transaction laundering on mobile. We provide acquirers, payment service providers, payment facilitators and online marketplaces with the ability to detect hidden mobile apps and fraudulent mobile payments being processed through legitimate merchant accounts.
The best way to be prepared to fight transaction laundering and other types of fraud is by adopting a tool that utilizes an extensive portfolio of cyber intelligence techniques that, together, mitigate the risk of fraud.
Want more information? Sign up for a free demo to discover how EverCompliant’s MerchantView helps you in the fight against merchant based fraud.