World’s Largest Survey Focused on Fraud and the Mobile Channel Released by Kount, CardNotPresent.com and the Fraud Practice; While Fraud Spikes, Uncertainties Abound and Protections Wane
As the mobile commerce channel continues to surge, a new study finds that merchants are not keeping pace with growth when it comes to fraud and mobile payment adoption. Conducted for the third consecutive year by Kount, Inc., CardNotPresent.com and The Fraud Practice, LLC, the 2015 Mobile Payments & Fraud Surveyanalyzes fraud and the mobile channel, uncovering trends in payments, new technology adoption, and fraud prevention strategies. Conducted from November 2014 to January 2015, the Mobile Payments and Fraud Survey had 2,000 survey respondents among different industries that are active in payments, risk management and the mobile channel, including merchants, service providers, card issuers, acquirers, and card associations.
The survey found that merchant awareness is not keeping pace with mobile fraud growth, and the support for the mobile channel is not meeting predictions and expectations as reported by respondents in previous years’ surveys. In addition, concerns over the implementation around new payment methods such as Apple Pay have risen. What’s more, while new tools are available to merchants to meet increased fraud, there is very little consistency in adoption of these tools across industries.
“The data shows that the industry as a whole is further behind on mobile adoption and fraud protection than they were a year ago, and in fact, some are even pulling back from it,” said Don Bush, vice president of marketing at Kount. “It seems everyone knows that mobile is finally poised to make an impact, but the urgency to make sure mobile fraud protection is in place is lacking. To successfully support the growth of mobile, organizations must first ensure IT departments are talking with fraud teams to understand risks and rewards or mobile fraud will grow to a bigger issue in the coming years.”
Exponential growth has led to many organizations’ confusion about best practices in payments and fraud mitigation. This may be one reason there appears to be a slight slowdown in adoption and policies surrounding the mobile channel.
“As barriers to mobile adoption continue to fall and mobile payments of all kinds surge, a green field is emerging for fraudsters,” said Steven Casco, CEO of CardNotPresent.com and the CNP Expo. “What was once not worth their time is becoming very lucrative and companies throughout the e- and m-commerce ecosystem are just beginning to understand how vulnerable they actually are. This report is the most comprehensive treatment of attitudes toward the mobile channel available, examining how merchants and service providers are trying to protect it and how fraudsters are attacking.”
“Overall, organizations are earning more revenue and implementing new solutions to meet the needs of customers and merchants in the mobile channel,” said David Montague, president and executive consultant, The Fraud Practice, LLC. “At the same time, there is a noticeable shift from a focus on risk management to managing the complexity of payment methods and channels, including mobile wallets and mobile point of sale payments. Organizations must work to find a balance in managing both as the industry continues to make strides in all aspects of mobile channel development.”
Survey findings include:
- Nearly half of organizations surveyed (40.8%) said they are uncertain if fraud increased following a major data breach and over half (60%) of respondents are uncertain if mobile fraud is growing at a faster, slower or equal pace as their overall mobile transaction volume.
- Less than 40 percent (39.7%) of organizations can detect if a customer is transacting from a mobile device, and only 17 percent can determine the type of mobile device.
- Mass merchants are most likely to identify mobile devices by type (45.5%), whereas zero percent of insurance companies surveyed could determine if transactions are coming from a mobile device at all.
- Gaming/social sites are the only merchant category able to identify all transactions that come from mobile devices, but only one-quarter (25%) can determine the device type.
- Less than 40 percent (39.4 %) of merchants surveyed track fraud by channel and differentiate it from standard ecommerce transactions overall.
- Organizations are split on where the fraud originates, as 32 percent indicated mobile fraud was coming from domestic transactions, while 31 percent stated most mobile fraud comes from international sources.
Mobile Fraud Risk Factors Are Misunderstood and Not Prioritized:
- While mobile fraud is on the rise, more organizations consider the mobile channel equally as risky as, or less risky than standard ecommerce — 41.4 percent and 7.8 percent for both citations in 2013, and 48.4 percent and 10.4 percent in 2015, respectively.
- Meanwhile, the share of merchants that believe mobile commerce is somewhat or far riskier than traditional ecommerce both declined, by about 6 percent and 4 percent, respectively.
- One-quarter (24.2%) of respondents feel mobile requires specialized fraud tools, a decrease from 2013 (32.2%).
- Nearly one-third (28.4%) of merchants plan to add NO additional tools or services to combat mobile channel fraud.
- At the same time, more than 37 percent plan to add mobile POS systems; 27 percent plan to add mobile apps for online shopping; and 18 percent plan to create dedicated mobile sites.
New Payment Methods Spike Implementation Concerns:
- The number of merchants that consider managing the complexity of new payment types the biggest obstacle to mobile adoption more than doubled to 20 percent in 2014 from eight percent in 2013, and has tripled since 2012 (6.5%).
- Consumers are using various payment methods for mobile transactions: credit cards are the preferred method (62.6%), but PayPal (13.5%) is almost as popular as paying with a debit card (14.5%).
- Consumers payment methods vary by merchant category: alcohol/tobacco customers are most apt to use debit cards (42.9%); direct response customers are most apt to use PayPal (66.7%); financial services customers are highest users of prepaid/gift cards (12.5%); and dating/social site users are most apt to use Bill2Phone offerings (16.7%).
Mobile Wallet Adoption Spurred by Apple Pay:
- Less than one quarter (23.7%) of merchants accept mobile wallets, which is the lowest amongst all respondent groups. PayPal is the most accepted form of mobile payment, more than credit cards and debit cards, accepted by 54 percent of merchants.
- While Apple Pay launched less than six months ago, it already has equal levels of merchant acceptance as Google Wallet; both are accepted by 32 percent of merchants that accept mobile wallets. However, support for Apple Pay (42%) by service providers and non-merchant organizations already exceeds that for Google Wallet (39%).
Fraud Protection Strategies Inconsistent:
- Respondents are uncertain if fraud tools can be used across channels, with nearly one half (47.4%) reporting that ecommerce fraud processes and tools can’t support mobile fraud risk management completely.
- Merchants are employing more tools and services to combat mobile fraud, as 79 percent overall say they are using one or two tools while only 40 percent of merchants listed just one service; the number rises to three for merchants with greater than $50M in revenue.
- Across all organizations, the top three tools for preventing fraud in the mobile channel are reported to be ID authentication (49%), device ID (48%), and secure mobile payment methods (44%).
- While it is still the most commonly used tool fraud prevention tool by all merchants in 16 different industries, identity authentication use declined in 2014 (38.2%) from 2013 (41.7%).
- There are nine industries where at least one-third of merchants use Device ID to prevent mobile fraud, including more than one-half of gaming merchants (57.1%).
- The top five most common tools or services used by merchants are ID authentication (38.2%), Device ID (35.7%), secure mobile payment methods (30.5%) rules engine (26.6%), and fraud scoring (24%).
- Use of fraud scoring increased year over year by 38 percent, and the use of text messaging for fraud prevention has nearly tripled in use, up from 7 percent in 2012 to 18 percent in 2015.
- Card Associations list fraud scoring in their top three (50%) and acquirers listed NFC as a top three tool (25%). Card issuers were most likely to consider mobile malware detection a top tool (22%).
- Mobile gelocation tools have also grown in use, now used by 9 percent of all merchants, up from only one percent two years ago.
Using payments to streamline everyday transport
By Venceslas Cartier, Global Head of Transportation & Smart Mobility at Ingenico Enterprise Retail
Once upon a time the only way to get from A to B on public transport was with cash – and likely a pre-paid ticket bought from a physical office. Nowadays, thanks to technological developments, options range from contactless and mobile payments, to in-app tickets and more. As payment methods advance, consumers and merchants are naturally moving towards Mobility as a Service (MaaS) systems, integrating various forms of transport services into a single mobility service, accessible on demand.
This move towards MaaS does not only streamline the consumer experience, it has other positive impacts too. Incentivising public transport use reduces environmental pollution, improves mental wellbeing by reducing travel-related stress, and aids productivity by freeing up time otherwise spent driving. With this in mind, let’s take a look at the current trends affecting the transport sector, as well as how payments can optimise transportation for both operators and consumers alike.
Optimising transport with payments
The payment process is integral to any service. A payment service provider (PSP) can provide a range of key benefits to operators by proving a gateway to the transportation open payment ecosystem, and ensuring they meet objectives in 3 key areas.
- Environmentally, by reducing the use of personal cars and alleviating pollution and congestion.
- Societally, making urban mobility more inclusive in terms of improving access to all areas and for all socioeconomic classes.
- Economically, by optimising investment in eco-structure and fostering financial transactions, therefore improving the wealth of the city.
Payments professionals’ expertise and technological solutions can make payments easy again for transport operators. They can provide a range of options so that the customer can choose which one is right for them, leveraging the capabilities of the mobility services’ infrastructure (contactless, mobile wallets, P2P, closed-loop, QR code, and blockchain).
Furthermore, they can help promote inclusion and sustainable urban development. For example, methods such as prepaid virtual cards, or mobility accounts linked to a prepaid account can reduce the risks of excluding the unbanked. The environmental impact per kilometre can also be reduced, along with the use of vehicles with lower emissions per person per kilometre.
Finally, PSPs can put merchants’ minds at ease, providing payment liability, allowing aggregation of all due amounts from all mobility service providers, and collecting payments in one single transaction from users while dispatching revenue between mobility service providers.
COVID-19’s disruption to the travel industry cannot be overlooked. In fact, research suggests that public transit ridership is down 70% across the globe since the onset of the virus, longer distance travel has seen reductions of up to 90%, and payment by cash has seen a 60% drop.
Being realistic, these behavioural shifts are unlikely to revert anytime soon, so it’s important for merchants to keep this in mind when thinking about payment methods. More than 70% of consumers and travellers say they are likely to avoid the use of cash over the next six months. As a result, more than 40 countries have already raised their contactless payment threshold, further helping consumers to avoid contact with frequently touched pin pads.
However, the pandemic has only accelerated the way things were heading already and highlighted the benefits. Within the context of the pandemic, transportation needs to reinvent itself and adapt its processes to suit the shift in commuter habits that we’ve already seen and will continue to see in the future.
Other trends to keep an eye on
Contactless has been steadily growing on the transport scene, as have mobile payments and in-app purchases. In fact, the recent move to mobile and online ticketing is the most promising method so far, having seen significant growth in the last few years and having been accelerated by COVID-19 as discussed above. Once consumers move to these easy, convenient, and seamless methods, it’s rare that they revert – so it’s a good idea for operators to think how they can cater to these preferences.
Speed and convenience are a must for busy travellers – but not at the expense of data security. Finding the right payments partner is therefore crucial so operators can safeguard their customers’ personal data, while also keeping on top of other security regulations/features such as P2P encryption, PCI certification, and tokenisation.
Next steps for operators
Public transport is essential for many peoples’ everyday lives – COVID-19 or no COVID-19. As such, mobility service providers can make a great difference to their service and operations by implementing the right solutions.
Grey skies ahead – Malta prepares for a gloomy 2021 if they can’t tackle financial crime
By Dhanum Nursigadoo, ComplyAdvantage
With the summer drawing to a close, many countries who rely significantly on warm weather tourism will be assessing the impact of Covid-19. Being a small island in the middle of the Mediterranean you would expect Malta to be taking a significant economical hit – just like we are seeing in other popular European holiday destinations – but this doesn’t take into account the strength of the Maltese economy.
Emerging from the eurozone crisis with one of the most dynamic economies strategically positioned between three continents, Malta has had one of the lowest unemployment rates in the EU and has recently seen its GDP growth expand year-on-year. But perhaps the most important aspect of the Maltese economy has been its attraction for foreign businesses with only a 5% tax on profits. It is no secret that Malta is a tax haven, probably one of the most effective tax havens in the world.
But you can’t pick and choose who takes shelter, and it’s no secret that money launderers have been taking advantage of the regulatory landscape in this archipelago.
The conditions of a tax haven suit criminal enterprises, who can take advantage of the opaque environment and blend their illegal activities with the same operations enjoyed by high net worth individuals and corporations who are looking to reduce their tax bill. And last year Malta’s keenness for secrecy and avoidance resulted in a damning report by Moneyval – the Council of Europe’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) body – which found that while the nation had made some efforts to curb money laundering there was still much to be desired in order to bring the tax haven up to standard. Overall, they were of the opinion that Malta viewed combating money laundering as a non-priority and this resulted in branding Malta with low to partial ratings for 30 out of the 40 Financial Action Task Force (FATF) recommendations.
The findings of the report were stated to have the potential to “create within the wider public the perception that there may exist a culture of inactivity or impunity”. This follows on from a series of international high-profile stories regarding Malta and financial crime. Most shocking was the murder of journalist Daphne Caruana Galizia – who investigated corruption and money laundering in her native country – and was killed by a car-bomb three years ago leading to international outrage and condemnation.
Now Malta is in a race against time to turn their reputation around or they will suffer genuine consequences. The FATF have threatened to place Malta on a “greylist” of high-risk jurisdictions unless they have shown a genuine commitment to combatting financial crime and implemented the recommendations of the Moneyval report. If they fail, this would make Malta the first EU country to make the list and join others such as Panama, Syria and Zimbabwe.
The pandemic has actually given Malta more time to meet these obligations, and it has been widely reported that an initial summer deadline has now been moved to October due to the widespread disruption.
As we head into the autumn, there are signs that Malta has begun to take action. The Malta Financial Services Authority (MFSA) has created and established an empowered AML now headed up by Anthony Eddington, formerly of the UK’s Financial Conduct Authority and who has previous experience of tackling anti-financial crime at Deutsche Bank. This team has already begun working closely with international experts, specifically partners in the US through the US embassy in Malta and the United States Commodities Futures Trading Commission (CFTC). In May this collaboration led to 25 new cases focused on money laundering in particular, and with plans to increase standard inspections and on-site investigations into businesses in Malta, it appears there is a change to the country’s priorities.
Importantly, the report highlighted a problem for countries that choose to become tax havens. In some cases it was not that the Maltese authorities deliberately turned a blind-eye, but simply that they did not have the necessary knowledge to effectively tackle financial crime in the first place. Law enforcement appeared unable to even recognise when crime was occurring.
But this blurring of financial compliance will not help businesses if Malta does indeed become “greylisted” this year. While not as devastating as being blacklisted (the two occupants of this list are Iran and North Korea) there are significant detrimental effects to being put on the FATF greylist. Although this signals that the country is committed to developing AML/CFT plans (unlike the blacklist) it still sends out a warning signal to the world that this is a high-risk area, with the country in question subject to increased monitoring and potential sanctions from the IMF and the World Bank. Make no mistake, being put on the greylist will be catastrophic for Malta’s economy.
It remains to be seen how the work to avoid such a calamity will affect Malta’s tax haven status. Perhaps with an increased fight against financial crime there will be less ability to defend one of Europe’s most competitive tax regimes. But if Malta does not show they are genuinely committed to tackling this problem, then the pandemic disruption to the island’s tourism may be minor in comparison to the grey clouds that now approach their shores.
How will the UK prepare a supply chain for the distribution of the Covid-19 vaccines?
By Don Marshall, Marketing role at Exporta.
The challenge of mobilising a supply chain for the introduction of a global and nationwide vaccine will be enormously complex. The process will be costly, and it’s likely the figures will stretch to the hundreds of millions for both the production of the vaccine itself and its distribution across the UK. We must prepare and plan a supply chain strategy to ensure it reaches those most in need in a timely and safe manner.
The task of immunising a whole population is something that has never been planned or likely imagined by anyone within a standard supply chain. A supply chain that goes directly from the manufacturer to the end consumer, or user/ patient in this case, is complex and goes beyond the scope of any single logistics company. It would have to be conceived and delivered via a large joint effort and collaboration between multiple organisations. Effectively distributing the vaccine will depend on the source of manufacture, its storage requirements, and protection of the vaccines from manufacture through to patient administration.
The majority of vaccines require storage within a specific temperature range and need to be handled safely and in hygienic conditions. Depending on where the vaccines are manufactured, the transport legs will vary; if they are coming from overseas, air freight will increase cost and complexity. In addition to supplying the vaccine, syringes, needles and containers also need to be taken into account when preparing the supply chain.
Securing the specific types of boxes or containers i.e. the lidded containers normally used for transporting pharmaceutical products will mean acquiring them from all available stockists and manufacturers. Delivery vehicles would then need to be considered, with temperature-control factored in. The medical supply chain can inform their approach to distribution by assessing data from previous supply chains, and how large quantities of vaccines have been sent out in the past. Collating successful vaccine delivery examples from other parts of the world would be advantageous here, the more we can do to prepare for a logistical challenge of this magnitude, the better.
The distribution of this COVID vaccine will be unique in its scale and for that reason, additional supply chains will need to be mobilised. Apart from medical supply chains, those best suited for this type of transportation are the fresh/frozen food industries and supermarkets. I would mobilise these businesses to assist with the vaccine’s distribution wherever possible and use their car parks and facilities for the temporary medical centres needed to administer the vaccine to the public.
Using the food industry and supermarket networks would leave the current pharmaceutical supply chains intact for health services, pharmacies and the NHS. It would protect those vital services and continue to serve communities across the UK. Inevitably, it would place a short term strain on food supply chains, but these are supply chains that are well-equipped and versed in coping with excess demand i.e. the spike endured from the brief spell of public panic buying at the start of the crisis. With adequate resourcing and planning, I believe the UK supply chain can and will handle this challenge.
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