Fraud problems faced in m-payments world


Mobile payments sector growth could bring fresh fraud challenges

UKFraud, a consultancy that works to eliminate the risk of fraud, has set up a new Special Interest Group (SIG) for the mobile payments sector to help protect mobile payment users as the sector grows.

The new SIG will monitor, analyse and report on key market developments for use by stakeholders in the domestic fraud prevention sector.

The SIG consists of top fraud prevention consultants coupled with representative input from a wide range of mobile payment industry specialists. In its initial review, the SIG will analyse those characteristics and challenges of the mobile payment market that are most likely to encourage fraudsters to target the sector. In particular, the SIG will investigate the factors that could give rise to an increased risk of fraud.

As well as significant growth forecast for the mobile payments market, the SIG is also conscious of the global spread of mobile payment, with the explosive growth of m-commerce in the US, China, India, Latin America and the Far East.

Recent data from the ITU supports this, pointing to global mobile subscriptions now reaching six billion. However, in the face of this backdrop of explosive growth, the SIG is concerned that key sector protagonists lack visible preparedness for the likelihood of such large scale market expansion or the resultant fraud risks that might ensue.

The SIG believes from its own analysis of the sector, that only a small proportion of marketers currently have any formal strategy for leveraging and exploiting mobile payments fully.

While there are also other reports that there is a huge need for mobile SEO to spread the news of the latest products to potential consumers, the SIG believes this is a relatively scarce activity and that adequate fraud systems have not been put in place by many of the main players.

The SIG also recognises that the greatest challenge to the development of plans and strategies that align organisations within the mobile payments sector is the sheer speed of technical change. Seemingly, all the main mobile device players are racing to produce the 'next best thing' and major forces such as Google with its Wallet and Apple with the Passbook are also having a significant and positive impact with market pundits. The international card schemes also have an influence on the development route(s) as do many other highly innovative and respected third parties including:  iZettle, mpowa, and PayPal.

However the chances are, says the SIG, that whilst some of the other sector protagonists, regulators and customers could potentially struggle to keep pace with such an enormous rate of change, fraudsters thrive in such fast moving environments.

Amongst the other contradictions to be reviewed by the SIG are claims by some pundits who point to the relatively modest levels of take up of mobile payment products to date. While some believe that many people are waiting until the next 'big thing' appears, others cite the plethora of new products already appearing.

The SIG feels that a widely respected organisation that might potentially take a positive lead in the payments sector is UK Payments (formerly APACS). The SIG will also review other alternatives and analyse which existing standards bodies might develop an effective solution.

Also, the SIG feels that potentially mobile payments control could be evolved through an entirely new 'standard' that will develop by default and be adopted by others. It is possible that this could be led by a card organisation, a proprietary payments provider, by an individual bank or a telecoms company.

Commenting on the new SIG, its chairman Kevin Smith, a former head of fraud management at Visa Europe and now an independent payments, risk and fraud specialist, said the review will highlight a need to 'build fraud prevention in' at all stages early on.

He noted: 'There will be so much potential change and growth, that it's not just the technology vendors or financial service providers that are watching the situation closely. Rest assured that a seasoned group of criminals will be looking just as closely, albeit at a different range of opportunities. Only by sharing information and working together at an early stage can the sector start to properly understand the challenges and offer a really effective series of counter-measures. Our aim is hopefully to assimilate and collate a weight of analysis that will prove useful to those stakeholders who are keen to fend off fraudulent activity.'

Bill Trueman CEO of UKFraud, added: 'Potentially there is a golden opportunity here for the UK to take a lead. Naturally a governmental lead would be preferable. However, some feel that The National Fraud Authority and also the Cybercrimes Unit are rather more engaged in defending UK Plc against attacks than driving commercial standards globally in internationally applicable growth areas such as this.

'However, they should play a major role here. Some though feel that recently the priority of these bodies has been turned upon the domestic public sector, as this alone is a mammoth area to direct and protect. Hopefully though, if the mobile payments sector grows as fast as has been suggested, the UK government will then see an opportunity to invest an appropriate amount of money in safeguarding the UK from fraud in the mobile payments sector. In the meantime, we shall work alongside other like-minded groups as a collective approach is certainly one way to ensure that the right information is shared by those in fraud prevention who most need it,' concluded Trueman.

The SIG's findings will be published later this year.


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