Mobile Payments And Fraud Risk

mobile payments and fraud

Mobile Payments And Fraud Risk

Mobile Payments And Fraud Risk

Apple Pay and Google Wallet are two of the most popular forms of mobile payments at the present. With 184.2 million people in the U.S. alone using an Apple or Android smartphones, chances are a lot of them wonder about mobile payments and fraud. From the consumer’s point of view, having your credit or debit card information stolen by a hacker isn’t exactly a comforting thought but being a business owner and having some level of responsibility for the consumer’s security is a completely different ball of wax.

How Do Mobile Devices Securely Pass Information?

In the case of the most popular mobile payment methods, Apple Pay and Google Wallet both use NFC to relay information. For those who are unfamiliar with NFC, the acronym stands for near field communication, which allows two pieces of hardware placed within centimeters of each other to pass information. In this case it would be the consumer’s smartphone and the merchant’s POS system.

Mobile payments and fraud are actually a lot less common than one may think. Firstly, to initiate a payment, the phone must be unlocked by the user. A physical theft of the device would not allow for unauthorized payments to be made without the passcode. As far as Apple Pay is concerned, credit card information is not stored in the phone or on any Apple servers. Instead they use “token” information which is substituted for the credit card during each transaction. After use, a new token is generated for the next transaction, making them useless for hackers.

This doesn’t mean that mobile payments using tokens are exempt from fraud. The consumer has to manually enter credit card numbers initially to set up the account. Traditional malware exploits can make it possible for hackers to gain access to that information during the set up process and link those accounts to their own devices.

What Is A Merchant To Do?

Luckily, the upgrades offered in the October 2015 liability shift are very closely aligned with NFC and mobile payment security. EMV chip technology and NFC use the same technology protocol, so if you have updated your terminals recently, this should give you the ability to accept NFC payments securely at little extra cost. This makes both mobile payments and fraud mitigation a much less scary thing to deal with.