The benefits of adopting and catering to the mobile retail channel are now indisputable. The explosive growth of mobile commerce worldwide is both bringing in customers from previously neglected demographics (i.e. underbanked and unbanked), and catering to the large percentage of consumers who now use mobile phones to access financial services, make payments, and complete purchases.
However, this transition is bringing a new set of challenges for mitigating online fraud, and online merchants and providers of financial services need to quickly prepare for these challenges in a cost effective manner.
This series of blog posts will discuss:
- The challenges of balancing risk analysis and user experience for mobile channels.
- How to address challenges and opportunities by leveraging natural aspects of the mobile channel and user experience.
User Experience and Going Mobile
As with any consumer application, user experience is key, and the companies designing end-to-end user experiences for the mobile channel are the ones driving higher adoption. Most businesses have high expectations of success and are pushing to “go mobile” as fast as possible. However:
- Most think their current website is ready for mobile users, which often yields a very small return. Mobile should be recognized as a new channel, separate from online.
- Some take the time to adapt their website for a better user experience, creating a mobile-friendly version of their website.
- Few develop a whole new user experience and new, mobile-ready website.
- Far fewer develop a smart app to control the entire user experience.
- Very few companies develop a user experience where payments are so well hidden that users don’t think about it.
In short, the more thought and resources you put into the end-to-end user experience, the higher your likelihood of success.
Enabling Mobile Commerce
It’s important to establish a framework to analyze how mobile contributes to your current traffic and configuration. Our solution provides this, but we’re not alone. Your framework should operate as a tool for analysis- to measure activity, identify areas of risk, and to frame the value of different channels. Each channel requires a different approach based on the types of risk it’s exposed to.
Methods of Mobile commerce
- Enable commerce from mobile devices (i.e. smart phones/tablets).
We use this segment to describe the ability of digital commerce websites to accept consumers through mobile devices that have internet browsers. The type of functionality that merchants and service offering companies provide include reduction of steps within the checkout processes, and mobile-friendly websites.
- Mobile Apps.
This specifically refers to providers who offer a smart phone application for mobile operating systems like iOS and Android. These applications have usually tackled user experience at a deep level, and can provide aggregated services through digital wallets.
- Alternative Mobile Payments.
Alternative methods include payments through SMS/Voice that leverage carrier billing. These include payments through SMS, but also cellular minutes as a form of currency (e.g. airtime top-up providers).
Most literature describing the risk challenges of mobile tends to focus on the difficulty of accepting payments from a mobile device. This focuses on solutions separated from the user experience and its environmental circumstances, which are important aspects to consider. We’ll focus more on this in Part III of the series.
Risk Analysis Challenges
Risk analysis challenges can vary by the business, but with mobile, we’ve identified 5 distinct issues:
- Expedited Checkout Experience.
Typically, the higher the friction in a transaction, the higher the rate of abandonment. Since customers expect a faster user experience, and are less inclined to type on tiny devices and keyboards, mobile providers usually seek to reduce friction by limiting the amount of information required for mobile purchases. This expedited checkout experience provides less information for risk analysis.
The exception to this are providers who focus on the overall user experience- collecting relevant information as a native aspect of the app (As mentioned, e’ll discuss this more in Part III).
- Common and well-known risk analysis tools may not be as reliable.
IP Geo location analysis and IP-based risk are common and very affordable tools to reduce fraud in e-commerce. However, IP addresses- the basis for IP Geo location and IP Risk- aren’t reliable for identifying location on mobile devices. Carriers assign IP addresses based on “Gateways” that may be located far from where the cellular access happens. Additionally, device fingerprint technologies in mobile are less accurate than on personal computers, with higher rates of both false positives (collisions), and false negatives.
- International Orders.
International orders have higher fraud rates than domestic orders (where domestic is based on the location of the provider. For the purposes of these blog posts, we’ll consider the United States as domestic). More international users now have access to the internet through smart phones than they do over personal computers (PCs), and the percentage of international orders through smart phones is steadily increasing. This makes international orders on mobile even more risky than orders from domestic mobile or international PCs. The average rate of fraud for international orders is double that of domestic orders (this is often exacerbated by fraud providers’ lack of local payment and identity verification data).
- Cross-Channel Solutions.
Providers who are serious about exploring the mobile channel also tend to explore alternative payments. However, fraud tools typically do not cross over all payment channels; most fraud providers focus only on specific payment instruments (e.g. credit cards), which makes it difficult for digital commerce providers to accurately track and analyze risk.
- Simple Measure of Fraud.
Most organizations don’t separate their analysis between mobile vs. non-mobile, and the overall cost of mobile fraud is therefore diluted within the category of online, PC fraud. However, public data reveals that fraud rates in mobile are double that of the web channel; it’s simply more difficult to isolate and apply specific measures in this environment.
In summary, most companies are aware that mobile is now an important area to focus on. However:
- Most companies don’t realize the effort that should go into, or the benefits of designing an end-to-end user experience for mobile. Mobile should be considered a new channel, rather than an extension of online commerce. Your customers are interacting with and experiencing your site in a much different context; the more thought that goes into designing this experience, the higher your chances of success.
- A proper framework should track mobile commerce separately from the start. This will allow you to segment and analyze activity, accurately measure success, and analyze risk by channel.
- Risk in mobile is underrepresented. Traditional risk solutions are not as effective in mobile settings, providers typically require less information, and most metrics do not separate mobile fraud in their categorization of online fraud- despite the fact that fraud rates on mobile are twice that of web. By accurately reducing mobile fraud, you may significantly reduce the overall fraud rates for your business.
To learn more about our own solutions for Mobile Fraud Prevention, reach out to us directly at [email protected] or on twitter: @identitymind.