‘Mobile-only’ banking as an industry is something that is accelerating at a rapid pace in the UK. For many it is an exciting development, but what does this mean for an everyday user in relation to credit card fraud? Are they more susceptible in a ‘mobile-only’ environment than with a traditional bank?
Challenger ‘Mobile-only’ banks are something of a novelty to some in the UK, and to others they are their modus operandi when it comes to banking. In 2015, 67% of millennials used mobile banking as their choice method. It hasn’t always been this way.
It wasn’t until 2013 that the Bank of England introduced a simplified two-step process with lower capital requirements for new banks, allowing a new era of technology-led companies to enter and disrupt the banking world as we know it.
The leading players in the UK market include Starling Bank, Atom, Resolut, Tandem, and Monzo, all which offer a variety of savings and payment options. With different growth and development trajectories, we have yet to see any one of these challengers becoming fully-fledged UK banks, but it is only a matter of time.
So, what does all this mean for online and credit card fraud? The Office of National Statistics “Crime Survey”, released in December 2016, found that 66% of ‘cyber related’ fraud could be categorised as ‘bank and credit account’ fraud.
Add in to the mix that increasing levels of financial fraud now equate to the UK losing £2 million a day in 2016, according to Financial Fraud Action UK (FFA UK), and it’s not a significant leap of faith to suggest there is a link between rising fraud and the evolution of mobile banking.
In fact, industry commentators have highlighted that the dramatic rise in financial fraud, and particularly credit card fraud, coincides with the pace at which society moves away from traditional banking models towards technological replacements that could be fraught with issues and vulnerabilities.
Traditional banks have also embraced the digital world, with almost every major player offering an app, mobile payments, or mobile banking service—to which customers have responded. HSBC says that more than 90% of its interactions are now conducted through its digital channels and not via brick-and-mortar branches.
Digital adoption and the evolution of ‘mobile-only’ banking sees no sign of slowing anytime soon. In fact, with lower capital requirements and banking being such an integral part of everyday life, it is likely that more players will enter the market.
With opportunity comes risk, as they say. While able to accept payments and transactions from multiple regions and often in multiple currencies, merchants and issuers face a much greater task when identifying chargebacks and credit card fraud.
Here in the UK, the process of preventing online and credit card fraud has been helped with the introduction of the Card Verification Value. This is also referred to as CVV2, CID or CVC2 depending on the card provider, which must be input at the point of sale on many websites.
Despite increased levels of security, including the introduction of 3-D Secure, credit card fraud isn’t going anywhere. As we continue to see the rise of ‘mobile-only’ and digital banks, it may continue to grow.
If prevention of all credit card fraud isn’t possible, it can certainly be reduced by managing the cardholder, merchant, and issuer relationships to ensure all parties have the right information. With the correct information (no matter how the bank/issuer’s process may differ from traditional banks), many disputes can be resolved in real-time before they become chargebacks.
Understanding the relationships between merchants, issuers, and cardholders is one of the most important factors when preventing credit card and friendly fraud from happening. Doing so can make the difference between misrepresented credit card fraud and the painful result of expensive chargebacks.
For more information on how Verifi helps facilitate collaboration between merchants, issuers, and consumers to stop credit card fraud and prevent chargebacks, contact us today.