Not With My Wallet, You Don't: Fraud Threat Continues to Curb Mobile Spending Growth

Editors' pick: Originally published Oct. 7.

Americans are willing to inch closer to mobile payments, but they want to extract a promise from digital financial providers: "Make my identity safe, and you'll get my business."

Consumers who demand tighter mobile security do so in large numbers. According to NTT Data, Inc., a Plano, Texas-based business and technology services provider, 75% of consumers say "guarantees against monetary fraud would accelerate mobile payment adoption." The report also found that almost 50% of financial consumers believe mobile wallets are less secure than cash. "Fear is a powerful inhibitor, and fraud fear is top of mind for many consumers," says Peter Olynick, senior practice lead in retail banking at NTT Data Consulting, Inc. "Consumers are not just worried about losing one or two transactions, they fear."

"Fear is a powerful inhibitor, and fraud fear is at the top of mind for many consumers," Olynick adds. "Consumers are not just worried about losing one or two transactions, they fear having their identity stolen."

If financial institutions can mitigate those fears and improve merchant adoption for mobile, we will see consumer adoption rates begin to accelerate," Olynick adds. A big part of the problem is that consumers and technology providers aren't on the same page. For instance, the NTT study showed that consumer appetite for sophisticated biometric features like facial and iris recognition is strong. "However, most businesses continue to rely on traditional passwords and finger scans," the report states.

Data security experts also say consumers are more confused, more than anything else, about mobile security, and that's led to user mistrust and frustration on the topic. "Our data shows

A big part of the problem is that consumers and technology providers aren't on the same page. For instance, the NTT study showed that consumer appetite for sophisticated biometric features like facial and iris recognition is strong. "However, most businesses continue to rely on traditional passwords and finger scans," the report states. Data security experts also say consumers are more confused, more than anything else, about mobile security, and that's led to user mistrust and frustration on the topic.

"Our data shows it's less about fraud and more about experience," says Nicholas Kinports, executive vice president at Notice Agency, a social content agency located in Chicago. "Mobile pay platforms are not standardized, and different retailers employ different setups, creating a confusing experience when customers try to pay." 

Kinports advises consumers to study brands like Apple that help drive consensus around a better mobile pay experience that consumers trust. "A survey we conducted over the last month shows a sharp uptick in use of Apple Pay on Apple Watch in Whole Foods, for example," he says.

Education, of course, is key.

"What this study highlights is that we have an education and adoption issue, potentially more than a vulnerability issue, and that is amplified by the sensitive nature of what mobile spending technology enables," notes Jake Weatherly, CEO and co-founder of SheerID, an eligibility verification company. "It's normal for consumers to be skeptical of new technologies focused on the purchasing experience, especially when their banking, credit cards, and other sensitive personally identifiable information are on the line."

"But it's not realistic to expect consumers to adopt mobile spending without understanding what is being done to keep them safe from fraud," he adds. "While most mobile spending technologies have been designed with greater fraud prevention, such as biometrics and device-level authentication, deeply integrated, it remains the responsibility of the companies who are designing and adopting mobile spending to continue to embrace best-in-class security practices and solutions to avoid unnecessary fraud.And the key to success is clear dissemination of that information to consumers through education."

Melissa Santora, a product strategist at Fiserv agrees that education is a key factor in overcoming consumer concerns about fraud. "For example, tokenization is quickly becoming the security of choice for digital wallets," Santora says. "However, cardholder education is needed to make them aware of its importance and benefits."

Santora says that tokenization, which enables more secure mobile payments by creating a token, like a digital account number that acts as a substitute for a consumer's personal account number, is a good breakthrough for mobile data safety. "It can protect their cardholders not only in a physical, card-present environment, but also using their mobile devices in-store, in-app and, now, in-browser where applicable for Apple Pay, Android Pay and Samsung Pay," she says.

But consumers just don't know that yet. As more digital wallets come to market, and more devices and merchant locations become enabled for tokenization, education will play a key role in increasing consumer awareness and allaying fraud fears, ultimately resulting in greater adoption.

But consumers just don't know that yet. "As more digital wallets come to market, and more devices and merchant locations become enabled for tokenization, education will play a key role in increasing consumer awareness and allaying fraud fears, ultimately resulting in higher adoption of mobile payments," Santora says. Education or not, until consumers are convinced their personal data is safe on mobile payment platforms, mobile growth will be limited. That doesn't sound like a consumer problem- it sounds more like a business problem, and technology providers wondering where the mobile customers are, better address it as soon as possible.

Education or not, until consumers are convinced their personal data is safe on mobile payment platforms, mobile growth will be limited. That doesn't sound like a consumer problem -- it sounds more like a business problem, and technology providers wondering where the mobile customers are, better address it as soon as possible.

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