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Merchants Vulnerable to Fraud from Mobile Shoppers

Ecommerce pros eager to match the rising tide of smartphone-using shoppers may be dismayed by a dramatic downside to doing mobile commerce (mcommerce) business. While 2014 saw 14 percent of all transactions arriving via the mobile channel, a frightening 21 percent of those transactions proved fraudulent.

The statistic comes from the LexisNexis 2014 True Cost of Fraud Mobile Study. Criminal activity via the mobile channel proved costly for merchants, with the study finding costs of $3.34 per dollar of fraud losses.

Businesses that accept payments from international customers have extra reason to be concerned. The report found mcommerce sellers incurred a 20 percent higher proportion of fraud for those payments originating internationally than larger ecommerce merchants do.

What’s the small business to do? Aaron Press at LexisNexis told EcommerceBytes that the difference between merchants and their fraud rates comes down to their own vigilance.

“When companies understand the nuances of their own experience with fraud, they can both stop bad transactions and allow good ones that might otherwise look suspicious,” he said.

Such understanding comes from collecting and analyzing data to identify transaction trends, according to Press. “At the most basic level, merchants should go beyond trusting issuer authorizations.”

This would include being able to differentiate between transactions coming from mobile shoppers versus those arriving by more traditional channels, something more online sellers may start feeling some pressure to do simply because of the number of consumers toting mobile devices.

A Javelin study noted in the report found 69 percent of consumers owning smartphones and 53 percent owning tablets in 2014. The prevailing opinion suggests those consumers increasingly want to use those devices for mcommerce, making it more tempting for merchants to consider offering multiple mobile-shopping payment options.

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David A Utter
David A Utter
David A. Utter is a freelance writer based in Lexington, KY. He has covered technology topics from search to security to online business and has been quoted in places like ZDNet and BusinessWeek. He considers his appearance on NPR's "All Things Considered" with long-time host Robert Siegel a delightful highlight. You can find him on Twitter @davidautter and on LinkedIn.