Recently I saw this article suggesting that 97% of mobile transactions in Asia are fraudulent? Can this really be true? I decided to investigate.
The article highlights an excellent report published by Secure-D looking into mobile ad fraud, which it appears is a largely hidden multi-billion dollar enterprise, impacting emerging markets in particular. As you might expect with an enterprise of this size it is multi-faceted and complex. Two of the ways fraudsters are making money are as follows:
- Fake clicks: The internet runs on advertising revenues obtained when a user clicks on an ad in a mobile app or on a web page. Fraudsters have numerous ways to create fake clicks, that look like they’ve come from a real person, and then be paid the associate fee. One way that they do this is by deploying malicious apps to the devices of unsuspecting users often disguised as a legitimate app offering an innocuous service like providing weather information.
- Hidden purchases: Many mobile users in emerging markets are unbanked and use their prepaid mobile airtime to purchase goods or services. Those malicious apps deployed to devices can also then siphon off funds from users without them realising it is happening. They just see their airtime running out more quickly than it otherwise might.
[Dave Birch] Card schemes point to Australia as a place where attempts to regulate interchange fees have resulted in no beneficial change for the consumer. In essence, as the Australian Consumer Competition Commission (ACCC) implies when it says that “nothing real has happened”, the card issuers were forced to halve interchange but the merchants did not pass the saving on to consumers. So was the regulatory intervention a good idea? Aneace thinks not:
Mandated reductions in interchange fees in Australia were supposed to cause retail prices to drop, directly benefiting consumers. The whole idea is that interchange is a “hidden fee” that retailers bundle into their prices, and that a reduction in fees charged to merchants would benefit customers. Sounds like basic, logical thinking that you would find in a high school economics and civics class, doesn’t it? As it turns out, the regulatory experiment resembles a high school lab experiment gone wrong.
[From Aneace’s Blog: Has interchange regulation in Australia redistributed wealth in favour of merchants?]
This makes me wonder why we expect any different outcome in Europe. It’s certainly true that IT suppliers are confident in their predictions of jam tomorrow:
The report is produced by Cap Gemini, and shows that SEPA might create “net benefits to payment markets” of €123 billion in six years.
[From The FinanSer: SEPA today, SAPA tomorrow]
Of course, it “might” create none at all, so it’s difficult to pass judgement on the specifics of the SEPA provisions, but it’s hard to argue about the benefits of anything actions that create a more efficient market (in which domestic debit schemes with 0.1 percent interchange have been scrapped and replaced with fr more expensive international schemes… oh wait…).
If we’re going to discuss the best way to improve the lot of European consumers, then there are two fundamental options: competition or regulation. This brings us back to the general point: if we want to improve the payments system (by which I mean reduce the social cost of payments, thereby increasing the net welfare) should we expect regulation to be the best way to achieve this?
[Dave Birch] No, I’m not sure what it means either, but we have a project helping a customer in the field of security, so I’ve been looking at the issue of perception and reality. In particular, I’ve been looking at the way that consumers see mobile (in the context of activities that require security, such as banking). I came across this:
Security concerns were found to be a major hindrance to take-up of mobile services, with just five per cent considering mobile handsets offer a “very secure modality”.
[From Finextra: UK consumers shunning m-payments]
I doubt that 0.5 percent of U.K. consumers know what a “very secure modality” is — I know I don’t: my dictionary says that “modality” means “a particular mode in which something exists or is experienced or expressed” — so we probably shouldn’t read too much into the absolute figures. But, nevertheless, there is concern about security in the mobile world (not just for payments) and we need to address the issue if we want to see a growth in m-transactions. Pointing out to people that mobile phone transactions are more secure than, say, credit card transactions on the web, isn’t the right way forward. The people interviewed are not carrying out a detailed risk analysis and coming to an informed view of countermeasures, they are reacting to their perceptions. By this reasoning, perhaps we should be developing some “security theatre” to make mobile deliver the right feedback, the right image, the right modality. I don’t think a little picture of a padlock is going to do it. I rather like the old proxmity payment demo we had on the original Nokia 3220s: the lights flash green when it’s ready for a transaction, the light flashes as it’s making a transaction and the lights go green or red depending on the outcome.