As Mobile Commerce Grows, M-Commerce Fraud Grows Even Faster

The number of retailers who offer customers a mobile commerce option has doubled in the past year — but m-commerce fraud is growing even faster, according to a new study from LexisNexis.

Meanwhile, the number of m-commerce merchants that let customers bill their purchases to their mobile carrier is growing almost as fast.

The 2014 “True Cost of Fraud mCommerce” report found that 15 percent of all merchants now support m-commerce transactions — more than twice the 7 percent doing m-commerce at the end of 2013.

On average, for merchants who accept mobile transactions, 14 percent of their transactions come through the mobile channel, the study found. Unfortunately, 21 percent of the fraud that hits those merchants comes by way of mobile — including fraudulent transactions and fraudulent refund requests.

Worse still, for every dollar of direct loss from fraud, the total cost was $3.34. That’s up 18 percent in the past year, compared with a 15 percent drop in the the costs of e-commerce fraud, to a cost of $2.62 per dollar of fraud. That’s due in part to improved fraud-fighting techniques for conventional e-commerce, but it’s also because more physical goods are being purchased via mobile — in the past, a higher percentage of purchases were for digital goods.

Mobile commerce merchants are also hit disproportionately hard by cross-border fraud, the survey found — in part because they’re slightly more likely (65 percent) than e-commerce merchants (63 percent) to accept international orders, but also because m-commerce merchants are less likely to use best practices for fighting mobile fraud, especially cross-border fraud.

Despite the high fraud costs, m-commerce merchants are still keeping overall fraud costs low, but that’s mainly because of the relatively low volume. That’s not sustainable as m-commerce volumes increase, though.

But aside from fraud, it’s how customers can now pay for purchases that may be most surprising. M-commerce merchants who let shoppers pay through a mobile Web browser remained steady at 67 percent, and those accepting payment through an app rose slightly to 49 percent (from 47 percent in 2013). But the percentage of merchants who let customers charge their purchases to their mobile phone bill soared to 35 percent, up from 21 percent last year.