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Study: Businesses are relying more on mobile payments, and worrying less about security

A phone can be used instead of cash and credit cards at many checkout points. Photo courtesy of Kount.

A customer can use a phone instead of cash or credit cards at many checkout points. Mobile payments account for a larger percent of most businesses’ revenue than five years ago, but fraud is also growing in the space. Photo courtesy of Kount.

Business owners are increasingly relying on revenue from mobile payments, but many aren’t taking the steps they need to to protect that revenue, according to a new survey.

Kount, an electronic commerce security firm, conducts an annual survey on how business owners view mobile payments and fraud. For its 2017 report, Kount surveyed 800 merchants in 14 countries and more than 30 industries.

Since Kount conducted its first survey in 2013, the number of merchants who accept mobile payments has increased from 54 percent to about 80 percent. Several business owners said in the survey that they plan to add more mobile payment options in the future. Only 7 percent of business owners said mobile payments weren’t important to their business, according to Kount.

“We’ve seen more experience in the mobile channel,” said Don Bush, vice president of marketing at Kount. “The revenue raised from the mobile channel continues to increase and the number of businesses that say it isn’t important continues to decrease.”

In 2013, half of the merchants Kount surveyed earned less than 5 percent of their revenue from the mobile channel. Today, that number is down to 20 percent. About half of the businesses surveyed earn more than 20 percent of their revenue from mobile payments.

“Guests are demanding that type of service,” Greg Andrews, director of risk management and fulfillment at Entertainment Benefits Group, said. His company has added electronic payment options and options for customers to use their phones to display tickets at events. “We see demand for mobile payments as a significant driver in the way that customer service is moving.”

But relying more on mobile payments as a source of revenue increases the risk of fraud, unless business operators add security tools as they add payment options. Mobile fraud increased 40 percent in 2016, Bush said.

“A few years ago (a mobile payment) was perceived as being far riskier (than other electronic payments),” Bush said. “It can be more risky and it can be less risky. It really depends on the tools you have in place.”

When Kount asked business owners whether customers care more about security or convenience, 70 percent said they care more about convenience. Many merchants have prioritized adding payment options and making them easier to use, according to the Survey.

There could be good reason for this. About 40 percent of the business owners Kount surveyed said more than half of their mobile transactions are canceled before being submitted. But it has created several blind spots in the protections businesses seek, according to the survey.

In 2013, 44 percent of business owners felt mobile payments were riskier than other electronic payment options, but only 25 percent still feel that way. Increasingly, merchants are feeling more comfortable in the space and aren’t seeking tools that specifically secure mobile payments, according to Kount.

“We probably have a little more education to do,” Bush said.

About 30 percent of businesses can’t tell what type of device an order is placed from. This can leave a business exposed to fraud because different devices operate differently and the security measures a business has to protect payments placed through a computer may not protect the ones placed through a phone or tablet, Bush said.

“If 28 percent of businesses can’t tell where their fraud is coming from they have a problem,” he said. If your visibility is that low you are in for some real issues.”

“Knowing where in the world an order is from, what language it is in and from what device can help you identify what might be fraudulent,” Andrews said. “If we didn’t have that level of transparency we wouldn’t be able to differentiate between legitimate business in that region compared to fraudulent orders.”

About Benton Alexander Smith

Benton Alexander Smith is a reporter for the Idaho Business Review, covering the Idaho Legislature, new business, technology and financial services.