A MasterCard study from earlier this year found that digital wallets were mentioned in 75% of tracked social media conversations about new ways to pay for products or services. With digital and mobile wallets on the rise, what impact does this have on credit card disputes?
With worldwide adoption of smartphones and technology, the value of the mobile wallet market is expected to reach $3.1bn by 2022. Three years on from the launch of Apple Pay, mobile wallet adoption continues to rise globally with consumers in the US and Europe beginning to catch up with their Asian and Latin American counterparts.
As mobile wallet adoption continues to increase, does consumer confidence in fraud protection for payments on these platforms follow suit?
M-Commerce and Fraud
ACI Worldwide research found that 14% of UK consumers are active users of mobile wallets, with 37% confident that their bank could be trusted to protect their personal information when paying via smartphone. The report suggests that this confidence may be misplaced; with more consumers adopting mobile wallets, the bigger a target they become for cyber criminals and fraud.
The research also found that only 43% of global consumers trust businesses to protect their data. However, more than 80% of consumers generally believe their mobile wallet data is secure.
“This data is a further wakeup call to the broader payments industry, including merchants, banks and financial intermediaries, that we must proactively educate consumers about security measures that are in place – to allay consumer concerns, which will not only result in enhanced customer experiences, but also help to reduce fraud losses,” said Andreas Suma, vice president and global lead, fraud and data, ACI Worldwide.
Despite confidence in the security of mobile wallet data, 65% of consumers indicated they would stop shopping with a given merchant after experiencing fraud or a data breach.
Updates on PSD2
The Revised Directive on Payment Services (PSD2) next year (coming into effect in January 2018) means that banks will be obliged to open their customers’ accounts to third-party payment and information requests, a measure designed to spur innovation in digital financial services. But at what cost?
The convenience economy has brought about many changes for payments of goods and services; it makes life easier for consumers and in many cases more straightforward for merchants. Despite all the positives, with every new payment method comes new risks for consumers and merchants, as well as new opportunities for credit card disputes.
Advances in Fraud Prevention
This shift in business practices has allowed for the rapid advancement of friendly fraud. Customers less frequently contact a merchant directly with a dispute; in fact, they’ve come to believe they have no choice but to contact their credit card issuer and file a credit card dispute.
While there is an increased risk with mobile wallet and mobile payments, there is also an additional layer of security that is provided with the technology that makes it possible to “tap and go”.
For merchants and consumers, the key is to not look upon any in-built security measures as the holy grail and sole source of fraud protection for mobile wallets. Fraud protection is an ever-evolving business, with fraud detection methods changing – and a need for all parties involved within payments to remain vigilant and take action.
By identifying the fraud challenges that exist with mobile wallet payments, merchants can put in place solutions and practices that work for them. The bad news is that there is no one-size-fits-all approach to insulating your business from credit card disputes. Relying on an off-the-shelf approach to fraud protection may not be the right approach.
With the market set to grow and showing no signs of slowing down any time soon, it is clear that mobile wallets are here to stay. As with any new payment method, after an initial period of understanding and in some cases uncertainty, there comes a time when safety and security come into question.
Credit card disputes are par for the course for many merchants, to others a result of doing business. Ensuring that you have fraud protection tools and clear guidelines in place will ensure that as a merchant you limit your liability for disputes, and in doing so build trust and a longer-term relationship with customers.