In the world of payments, innovation moves fast. Blink and suddenly we’ve gone from swiping cards to tapping at the terminal. The next stage of connectivity is upon us now, as customers make payments via mobile devices for convenience. This stage of connectivity drives the migration of cash and plastic card payments to mobile and digital wallet payments, bringing with it an increased threat of fraud and credit card chargebacks.
From Cashless to Cardless
The changing nature of the payments landscape has never been more exciting. Cashless and cardless transactions comprise more than half of all sales in the UK. There are a total of 108.4m contactless cards in issue in the UK, split between debit (72.6m) and credit/charge cards (35.8m). Greater strides towards a cardless society has started in the UK, with shops like Sainsbury’s trialling mobile payment. Today, mobile payments are a drop in the ocean compared with payments in more traditional channels, but the volume of mobile retail payments is nothing to shrug off.
By 2020, it’s predicted that Brits will spend around £1.2 billion a week with their smartphones. A quarter of us expect to make purchases daily with our smartphone by 2020, spurred by the launch of mobile and digital wallets like Apple Pay and Android Pay. While this opens up money as a versatile tool, underneath is a dangerous undercurrent. The Financial Fraud Action UK has warned of the link between cardless transactions and fraud risk.
Mobile Payment Fraud Set to Become Painful
The mobile channel has attracted a growing legion of dedicated users, yet wherever legitimate payments begin to flourish, fraud is soon to follow. Mobile payments fraud will experience a rise that most stakeholders are simply unprepared for. Fraudsters are tapping into the latest technologies to dupe digital wallet providers into setting up fake accounts or processing fraudulent payments.
As cybercriminals increasingly use stolen identities to appear legitimate, businesses are finding it harder to tell the difference between legitimate customers and fraudsters. Recent data breaches and growth of “crime-ware” tools have worsened the problem. However, merchants can put in place solutions and practices that work for them by identifying the fraud challenges that exist with mobile wallet payments.
Reduce Your Risk of Fraudulent Chargebacks
Every new payment method comes with new risks for consumers and merchants, as well as new opportunities for transaction disputes. This means merchants and issuers can expect to see a notable rise in credit card chargebacks and a rapid advancement of friendly fraud.
Ensuring that fraud protection tools and clear guidelines are in place will ensure that, as a merchant, you limit your liability for disputes, and in doing so build trust and longer-term relationships with customers.
One way that merchants and issuers can help spot friendly fraud and prevent fraudulent chargebacks is through merchant-issuer collaboration. Working with a real-time collaboration network to prevent chargebacks provides both parties with the ability to resolve disputes with customers in an efficient and timely manner and avoid a negative customer experience.
For many technologically savvy customers who are increasingly looking for more streamlined digital solutions to everyday transactions, the traditional wallet is becoming somewhat redundant. As new solutions fuel the market, fraudsters search for ways to exploit these new mobile payment systems. Merchants and issuers ought to be equally watchful.
For more information on how Verifi is committed to providing secure payments and our industry-leading fraud and chargeback prevention solutions, contact us today.