Mobile fraud looms as growing threat, study says

By Michael FerreeMarch 4, 2015

As affiliate marketing increasingly moves toward the mobile environment, marketers must worry about the ever-growing threat of mobile fraud.

If new research sponsored by mobile security company TeleSign and IT security company RSA is any indication, that threat is serious. The study, conducted by J. Gold Associates, found that among 250 enterprise-level businesses, the average yearly revenue loss attributed to mobile fraud was $92.3 million. That amounted to 3 percent of the companies’ total revenue and as much as 25 percent of their online revenue.

Authors of the study called those losses “staggering.”

A broader view of mobile fraud also shows staggering losses.

According to a study by LexisNexis Risk Solutions, revenue that mobile commerce merchants in the US lost to fraud soared 70 percent in 2014 to 1.36 percent, compared with 0.80 percent in 2013. One-fifth of all fraudulent transactions were tied to mobile.

Steve Jillings, CEO of TeleSign, said his company is seeing “an uptick in online fraud resulting from today’s environment of large-scale data breaches and security incidents … .” He cited affiliate fraud, spamming, phishing and e-commerce fraud as contributing to this surge.

“With the shift to mobile e-commerce well underway, we know that hackers and fraud are never far behind,” Jillings said.

The businesses included in the study predicted 47 percent growth in their mobile revenue over the next few years, and Jillings said this represents a “greenfield” for fraud if these businesses don’t ramp up their mobile security.

Nearly one-fifth of the businesses in the study indicated 25 percent to 49 percent of their fraud was connected to mobile. Part of the reason: One-fourth of the businesses said they lacked login requirements for mobile users.

“There’s a false sense of … security in the market,” Angel Grant, senior manager of fraud risk and intelligence at RSA, told CSO.

Over the next several years, authentication technology like biometrics and “soft tokens” will mostly replace the combination of a username and password as the primary means of mobile authentication, according to the study.

“Mobile security has huge payback, likely returning 10 to 20 times or more of the investment,” said Jack E. Gold, founder and principal analyst at J. Gold Associates. “On the flip side, companies who fail to make the required investment in enhanced mobile security will not only have sharply reduced revenues, but their operation costs will be much higher.”

Among the industries represented in the TeleSign-RSA study were retail, software, financial services and health care.

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