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Increase in Mobile Fraud Outpaces Mobile Transaction Growth

According to a recent study from LexisNexis mobile commerce represents 14 percent of all transactions, but 21 percent of fraudulent transactions are attributed to the mobile channel. Meanwhile the value of fraud losses for mobile channel merchants quickly grew from 0.8 percent of revenue in 2013 to 1.36 percent of revenue in 2014.

According to estimates from Forrester Research, mobile payments will account for $67 billion in U.S. transactions in 2015, up from $52 billion in 2014 and $32 billion in 2013. While mobile transaction volume grew by nearly 63 percent from 2013 to 2014, the value of fraud losses for mobile channel merchants increased by 70 percent, from 80 cents to $1.36 per $100 in revenue, during this same time frame.

The estimates on mobile fraud growth come from the LexisNexis® True Cost of Fraud Mobile Study, which surveyed over 1,100 merchants and was performed by Javelin Strategy & Research. A hallmark of the True Cost of Fraud studies is the Fraud Multiplier (SM) which represents the total cost to an organization per one dollar in fraud losses taking into account the investigative costs, fees and other expenses in addition to lost products or services. Looking at only mobile purchases the Fraud Multiplier (SM) increased from $2.83 in 2013 to $3.34 last year. The Fraud Multiplier (SM) for mobile purchases now exceeds that of online purchases, which fell to $2.62 last year from $3.10 in 2013.

There are several reasons contributing to the increased fraud losses in the mobile channel. For starters, fraudsters tend to target what is relatively new because new channels and payment methods tend to have more gaps and vulnerabilities. Another consideration is that merchants operating in the mobile channel tend to be operating in a higher total number of payment channels. According to the LexisNexis study, mCommerce merchants accept payments in 4.5 channels on average compared to 2.6 channels for all merchants. Although many merchants operate in both the traditional eCommerce and mobile commerce channels, fewer are taking measures to manage fraud effectively in each channel by tailoring risk strategies to each.

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