Rising fraud rates in mobile channels have spawned a bumper crop of new tools to battle crime, but merchants appear to lack consensus on which ones are most effective.
Faced with an array of new anti-fraud tools that leverage artificial intelligence and machine learning, biometrics and one-time passwords, the majority of merchants surveyed recently by Kount veered away from naming any single technology as superior than the others.
“Merchants are being overwhelmed with online and mobile fraud and similarly with tools to manage it,” said Al Pascual, senior vice president and research director at Javelin Strategy & Research, whose most recent data suggests online fraud rose 40% between 2015 and 2016.
In its fifth annual survey of 800 merchants, Boise, Idaho-based fraud solution provider Kount asked participants to select the three best options on a list of 19 different types of fraud-fighting tools More than half—52%—of respondents said they would pick a “complete” fraud solution over a more targeted tool, up from 22% in 2015 who said they preferred a broad approach solution to fight fraud.
Merchants ranked device identification and “secure payment methods” as the second- and third-best methods of fighting mobile fraud, at 27% and 24% respectively, but no other specific fraud-fighting technologies stood out this year.
Biometric technology was among four new fraud-fighting tools on Kount’s list this year and merchants put its effectiveness close to other approaches including artificial intelligence/machine learning and 3-D Secure, with between 22% and 23% of merchants noting each as among the three most effective tools for battling mobile fraud.
3-D Secure joined the list this year because a revamped version of the decade-old technology is in the works for release later this year. Other new options on Kount’s list for 2017 included CVVs and one-time passwords; about 20% of merchants ranked each of those as one of their top three fraud-fighting methods.
Fraud-fighting methods that lost popularity with merchants this year compared with previous years were identification authentication, text messaging, telephone number identification and mobile geolocation. Kount dropped one outdated antifraud approach—modeling—from this year’s list.
When selecting technology to fight mobile fraud, merchants increasingly are focused on weighing the benefits versus the cost of investing in fraud tools and are instead leaning toward programs that offer guarantees against fraud, Pascual said.
“The explosion of new tools on the market can easily be viewed as attempts to meet the demands of merchants, and how that tends to fall out is that merchants with the highest fraud rates are the ones most willing to test and use advanced fraud tools,” he said.
Asked to list the biggest obstacles to choosing a mobile fraud strategy, 52% of merchants Kount surveyed listed the “cost and complexity” of new solutions, while 47% said their own lack of IT resources is an obstacle.