E-Vendors To Wage War On Mobile Fraud

Mobile users’ personal information, such as their location and what device they are using, will soon be used to validate the vast majority of mobile commerce transactions and combat fraud, analyst firm Gartner said on Monday.

By the end of 2013 location or profile information from mobile phones will be used to validate 90 percent of mobile transactions involving organisations such as banks and social networks, Gartner said. The company will be examining mobile identity management issues at its Security & Risk Management Summit 2010 beginning on Wednesday in London.

Gartner estimates that by the end of 2013, 12.5 percent of all e-commerce transactions will be carried out using mobile devices, vastly increasing the possibilities of mobile fraud.

Mobile fraud tools

Current enterprise applications include fraud detection tools, but these are tuned for fixed-line e-commerce transactions that don’t work well or at all in the mobile world, according to Gartner. The company doesn’t expect mobile commerce tools to mature until at least 2012.

“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,” said Avivah Litan, vice president at Gartner, in a statement. “This increase in confidence will help open up new possibilities for context awareness that will be richer than they are in fixed-line commerce.”

Mobile fraud detection systems are likely to use data including mobile device data, such as the identity of the particular mobile device and browser, and location information such as GPS data or data provided through mobile network operators, Gartner said. Some of this data, such as location information available via network operators, wouldn’t require a user to opt into the system or even be aware the data was being used.

Gartner noted that some online fraud detection vendors are starting to tune their risk scoring or rule-based models specifically for mobile applications, for instance looking at the mobile device itself, the location of the phone and the behaviour of the user inside the host application while carrying out a transaction.

“This area is very new to the fraud detection vendors, as there is little mobile transaction experience to draw on in order to build effective risk models and scores that significantly improve on risk models that have already been built for fixed-line computing,” Gartner stated.

Tailored marketing

User information from mobile phones is also likely to be increasingly used by e-commerce providers to authorise fixed-line transactions, as well as to provide customised advertising, Gartner said.

The firm estimated that 70 percent of the largest 20 global credit card issuers, who authorise more than 50 percent of all payment card transactions, will adopt the use of mobile context information to help detect fraud on fixed-line transactions, with more than 15 percent of all payment card transactions validated using such information by the end of 2015.

“Organisations 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 personalised and customised marketing and advertising information,” said William Clark, research vice president at Gartner, in a statement.

Gartner’s report on the context-aware mobile fraud detection is available from the company’s website.

iPhone fraud

Recent mobile fraud incidents have included a scam involving stolen iPhones that cost mobile network O2 several million pounds.

In June the Serious and Organised Crime unit (SOCA) warned about scammers using mobile phone calls to lure victims onto expensive services.

“A ‘missed call’ fraud will call a mobile phone for one ring only to entice people to ring back. When they do, they are calling a specially set up premium rate phone number without knowing it. Some fraudsters even use a recording of a phone ringing to keep people on the line for longer,” the agency said.