In the United States, mobile payments are expected to reach $470 billion by 2020and they’re predicted to pick up speed through 2017. This rise in mobile payments is generally good news for retailers and consumers alike, however, it does mean that merchants can be exposed to new or greater risks.
Threats Posed by Mobile Payments
Government agencies have long warned about the threats posed by mobile payments, such as money laundering, however, the dangers don’t end there.
Like any other form of card payment, mobile transactions can leave merchants vulnerable to fraud through chargebacks or ‘friendly fraud’, and research indicates there has been an increase in customer not present fraud overall.
There are several possible reasons as to why mobile payments can vulnerable to fraud.
One of the factors driving this is EMV. Put simply, with fewer opportunities to commit fraud in store, fraudsters turned their focus onto customer not present fraud, and this includes mobile payments.
Then there is the increase in mobile payments in general. As noted in the introduction, mobile payments are on a steady surge and this could potentially increase the chances of a merchant being exposed to chargebacks.
There’s also the multiple channels involved in mobile payments. Apps, NFC or contactless payments and mobile wallets all present opportunities for fraud and chargebacks.
However, this does not mean that merchants should steer clear of mobile payments, they just need to learn how to handle chargebacks and suspected friendly fraud.
Friendly Fraud, Chargebacks & Mobile Payments
Statistics reveal an unhealthy trend in friendly fraud. The figures are steadily increasing and a survey by LexisNexis reveals that friendly fraud, which is basically a form of chargeback, is now one of the top concerns among merchants.
Figures published in 2015 show that more than 20 per cent of fraudulent transactions were from mobile commerce, and the findings led to Dennis Becker, Vice President, Corporate Markets at LexisNexis, to call for mCommerce retailers to do more to boost security.
“Mobile commerce is going to be more widely adopted by merchants because customers are clamoring for the convenience. To reduce customer friction and sell more through the mobile channel, now is the time for mCommerce retailers to put in place fraud prevention tools to counter the disproportionate amount of fraud that is currently occurring.”
How Do Merchants Handle Chargebacks for Mobile Payments?
Treat your mobile payments in the same way as you would any other transaction. If you need to fight a chargeback, you should have easy access to detailed records.
As a retailer, the kind of information you’ll need to keep track of include:
- The times and dates of the sale.
- Total value of the transaction.
- The authorization obtained.
- And if you’re sending goods out, keep records of the date sent and always insure valuable goods in case of damage in the post, which could lead to a chargeback.
Keepthe above information readily available, and if you receive a request for information regarding a chargeback, supply it as soon as you can.
Fighting Chargebacks for Mobile Payments
Having the above information will make fighting a chargeback much easier, however, it’s better to only fight a chargeback if you really feel that you can win the case and if you have solid evidence to support you.
In some cases, where the purchase is of low value, you might decide not to oppose it at all. However, if you do, you’ll find fuller information on the information you’ll need to fight a chargeback here.
In addition, remember the kind of information you’ll need to challenge a chargeback can vary between different payment processors. For instance, PayPal has its own set of guidelines to follow should a chargeback occur.
Remember: Communication Is Key
Sometimes a customer just isn’t happy with a purchase and rather than contact the original seller, they simply file a chargeback.
It doesn’t matter whether you are selling in store, via ecommerce, or accepting mobile payments, good communication is always key when dealing with a customer.
In these cases, talking to the buyer to establish why they aren’t happy can be the easiest way to resolve it; if you come to an amicable agreement, the buyer has the choice of withdrawing their chargeback claim with the card company.
It is, of course, always better to avoid chargebacks where you can. And although it won’t be possible to avoid every single chargeback, there are a series of precautions that you can take to make them less likely. These include:
- Carrying out the usual set of checks that you would conduct for any other form of transaction
- Training staff so they know what checks to make
- Looking out for any anomalies that might suggest a transaction isn’t genuine. For instance, you might spot some inconsistencies between contact details, the individual’s name or the IP address might not be consistent with the seller’s country
- Using software so you can to flag potentially fraudulent transactions
- If you are unsure about any of the buyers you are dealing with, doublecheck their contact details.
- Take extra care with high volume, high-value transactions from high-risk countries
- And look for strange buying patterns that could indicate fraud
Using a Payment Processor
With the backing of a payment processor, you will have access to fraud prevention tools that can limit the chances offraudulent transactions occurring in the first place. Moreover, you will have plenty of support available should a chargeback occur and you wish to fight it.
Chargebacks are an unfortunate part of every retailer’s life. And while the introduction of EMV has been significant in reducing in store fraud, it has moved fraudulent transactions and chargebacks to other channels, like mobile payments.
However, while some state that mobile payments give rise to new rise risks, others argue that provided retailers take the necessary precautions, mobile payments could, in fact, pose a lower risk of fraudulent payments and chargebacks.
To reduce your risk of fraud, remember that mobile transactions should be treated the same as any other.