Merchant shopping apps have plenty of benefits—including increased visibility, engagement, and customer loyalty. As customers become increasingly comfortable with mobile and in-app shopping, it becomes vital for merchants to deploy a higher level of security to those channels. Here are the most common methods fraudsters use to take advantage of merchants through mobile apps.
App-install fraud is when a company falsely claims credit for getting users to download an app. EMarketer estimates that $7.1 billion were spent on mobile app install ads in 2018, creating a substantial market for fraudsters to take advantage of. Companies typically see app-install fraud when fake mobile devices install apps and get credit for the install. The fraudsters utilize mobile fraud bots that mimic users' behavior to trick merchants into thinking that an actual person downloaded the app. Sneaky, huh?
You may ask, how can merchants avoid app-install fraud? A key detail to look for is non-human behavior that occurs after the app is installed. Suspicious behavior can include odd install times, too many clicks from one source, odd maneuvering through the app, etc.
Fake apps can be problematic for merchants who have a public facing mobile app. The most common fake app fraud involves fraudsters attempting to mimic the official mobile app's look and functionality. Once a customer unknowingly downloads the fake app, the fraudster can perform a variety of devious functions such as snagging credit card details, email addresses, passwords, loyalty rewards, and other valuable information.
Loyalty program fraud is becoming more commonplace. The percentage of cyberattacks targeting loyalty and rewards accounts nearly tripled from 2016 to 2017 and has cost companies more than $2.3 billion worldwide. Loyalty points have become a target for fraudsters because rewards are not viewed as money. As such, customers and merchants alike are not keeping track of points as closely as they would their cash.
Although loyalty fraud and fake merchant apps may not cause merchants to lose money directly, it can hurt their bottom line by decreasing customer loyalty and increasing customer service costs. Here’s a perfect example -read here.
Chargeback, Friendly and True Fraud
Merchants who accept purchases through mobile apps should be aware of the three types of payment fraud. Friendly fraud occurs when a customer accidentally disputes a charge they authorized. The disputed charge can happen because of forgetfulness, a misunderstanding, or a family member making a purchase. Chargeback fraud is when a cardholder is maliciously using the dispute process to regain their money from the transaction, while still retaining the product or services. Lastly, true fraud is when a fraudster obtains credit card credentials and successfully makes a purchase.
Prevent Disputes in Real-time
Take your merchant descriptor to the next level by allowing issuers to obtain company and transaction details in real-time. This enhanced information allows the issuer to “talk away” a customer dispute by resolving cardholder confusion. In fact, providing order data to cardholders in real-time prevents 60% of chargebacks from ever taking place. Learn more about stopping disputes with Real-time Resolution here.