Fraudulent e-commerce transactions are estimated to cost merchants approximately $19 billion in 2019. With a growing amount of commerce occurring on mobile devices (e.g. already 42% for China's Alibaba) online fraud is a topic not to be taken lightly as it will be growing at a similar pace to mobile driven e-commerce. Below is an overview of how fraud is dealt with in the carrier billing industry.
Fortunately for consumers and merchants, mobile payments are significantly more difficult to exploit than card-based payment solutions. The main reason is that physical access to the mobile phone is needed to confirm every transaction. Unlike bank cards, knowing the user's payment information (their phone number) is not sufficient to complete purchases. Many users also protect their phone by locking it with a PIN which increases security even further. Additionally, the average transaction value of transactions processed by carrier billing are lower compared to the ones processed using bank cards and that increases the psychological security for users.
Nevertheless, as carrier billing companies provide financial services to merchants, they still need to take precautions to detect and combat fraud. In carrier billing, fraud might occur in case of purchases being made off a stolen phone or where a seemingly legitimate merchant has decided to not deliver consumers the goods they have paid for. To prevent such occurrences, we have adopted a three-step approach: (1) an automatic risk scoring platform, (2) manual checks by our fraud monitoring and compliance team and (3) checkout flows hosted and maintained by Fortumo.
The risk scoring platform looks for patterns in consumer and merchant behaviour that deviate from the expected behaviour of an average users. This is done by comparing each transaction to an established set of criteria called velocity and attribute rules. The risk score of a transaction goes up in case of abnormal behaviour such as:
- The consumer spends exceeds a set threshold with a certain carrier or merchant within a specific period of time
- The consumer's phone number is associated with an unreasonable amount of user ID-s within a certain period of time
- The consumer exceeds a statistically average purchase amount within a certain period of time
- Several devices are used for transactions with the same phone number within a certain period of time
- The user's claimed IP does not match their actual IP
The platform determines whether a transaction's risk score falls below the accepted limits - if it does not, the transaction is rejected. Since Fortumo processes transactions in 90+ markets across a broad variety of merchants, preventing fraud by statistical means is extremely effective.
Beside risk scoring, our fraud and compliance team reviews every merchant and their services before they are able to start collecting payments, based on know-your-customer and carrier driven compliance policies. Monitoring continues after they have launched their services which means that when our team detects any wrongdoings, we immediately react and take the appropriate measures.
The third solution to preventing fraud are our payment products themselves. As Fortumo hosts the checkout flows, the pricing, legal disclaimers and anything else that might be used for fraud on the merchant's side can not be modified by the merchants themselves. This is somewhat similar to secure banking solutions that are widely used in the credit card industry.
Beside the obvious benefit of preventing consumers from fraud, hosting the flows ourselves means we are also able to deliver a better payment experience. This is achieved by Fortumo having all checkout flows available in local currencies and languages, which is also beneficial to merchants as they do not need to worry about localization.
With the combination of a risk scoring platform, manual reviews by our fraud team and Fortumo-hosted payment products, both consumers and merchants using Fortumo can be certain that they are using one of the safest payment methods available for online transactions.