The rapid adoption of smartphones is forcing banks, social networks and other e-commerce providers to implement the kinds of fraud detection capabilities that have become mainstream with fixed-line computing. By year-end 2013, location information or profile information from mobile phones will be used to validate 90% of mobile transactions, according to Gartner, Inc.
"Because of the improving browser experiences on smartphones, mobile commerce and transaction execution are set to increase rapidly," said William Clark, research vice president at Gartner. "We estimate that by the end of 2013, 12.5% of all e-commerce transactions will be mobile."
Clark says that enterprise applications must detect fraud in these mobile environments, but fraud detection tools available today that work in fixed-line computing environments don't work well or at all in the mobile world. "There are a number of methods that can be implemented to help enterprises detect fraud in the mobile space, but they are still in their early stages of development, and it will take until at least 2012 for them to transform from embryonic applications to technically mature systems that work easily and transparently across disparate mobile networks."
Avivah Litan, vice president and distinguished analyst at Gartner, says that the evolution of these fraud detection tools will play a part in turning mobile commerce into location- and context-aware commerce by increasing the confidence of businesses, financial institutions and end users. "This increase in confidence will help open up new possibilities for context awareness that will be richer than they are in fixed-line commerce."
Fraud prevention methods available today to mobile applications include mobile device identification; location of device; and risk scoring and/or rule-based models specifically for mobile applications.
"Given the explosive growth of smartphones and other mobile devices, the increase in mobile commerce, and the migration of fraud attacks to these devices, using mobile fraud detection in mobile commerce environments is an imperative," Litan said. "While smartphones are a catalyst for mobile commerce, enterprises need to also consider the potential of using context information for fraud detection for nonmobile transactions by combining and correlating the location information that can now be derived from any kind of mobile phone worldwide with the other process information associated with the consumer who owns the phone."
Gartner estimates that 70% of the largest 20 global card issuers (who authorize more than 50% of all payment card transactions) will gradually adopt mobile context information to help detect fraud on fixed-line transactions, and that by year-end 2015, more than 15% of all payment card transactions will be validated using context-aware profile information.
"Enterprises that want to remain competitive in electronic commerce over the next five years should begin exploring context-aware applications by year-end 2011, for both fraud detection and later on for customer acquisition and retention activities afforded by personalized and customized marketing and advertising information," Clark said. "Both users and service providers should have a better and more secure experience enabled through the use of rich contextual information coming from mobile phones."
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