Merchants are less likely to dispute chargebacks on transactions originating from mobile wallets and significantly less likely to win those they choose to represent. Consumers may be more prone to commit friendly fraud with mobile wallet transactions and the dishonest ones may already be exploiting this trend.
Although digital wallets offer the convenience for consumers to pay by simply using their phone instead of their physical credit cards, it has opened a new realm of security features that don’t stop friendly fraud. Many believe that the digital method in taking payments is a safer alternative due to the inherent biometric authentication on phones, however this is not always the case. With ApplePay and GooglePay at the forefront, the inherent biometric authentication when adding a card on a digital wallet is not enough to guarantee security, leaving room for the risk of fraud. Through a series of independent checks, Ravelin has found that when adding new cards to ApplePay and GooglePay wallets, only a select few banks will verify new cards individually.
This is a serious emerging issue for merchants. According to the survey, there was only a 5 percent win rate when merchants represented from digital wallets, compared to the 56 percent success rate when a credit card is used directly on the 37 percent of chargebacks that are typically challenged. With the current state of the world in mind, contactless payments continuously are on the rise and will eventually be the new normal. Taking this into perspective, solving the problem and finding a solution for the friendly fraud increase by digital wallets is vital.