The Challenge of Mobile Wallet Fraud
In 2016, the total cost of dealing with fraud was $3.08 per $1 of fraud. More so, mobile commerce losses due to fraud are expected to climb sharply to 1.36% of total transaction volumes (LexisNexis®, Jan 2016). In 2017, these trends could lead issuers and merchants to bear $20B of fraud loss and $75B overall costs of Mobile-Wallet fraud. During the first months following the launch of the ApplePay Mobile-wallet in September 2014, thefraud ratio skyrocketed to more than 5%. For the long list of card issuers who had joined the ApplePay liability shift process, this was double or triple the amount of initial transaction fees, resulting in heavy losses.
Worldwide, credit card fraud and identity theft cost customers billions of dollars annually. Mobile based payments are exposed to increased fraud, and as a result, additional passwords and other authentication means are required, making mobile wallets more cumbersome than plastic cards.
Even when the financial losses are not borne by the issuer or Mobile-Wallet provider, those institutions can still experience significant operational expenses and possible reputational damage. At present, a customer who discovers credit card fraud must immediately call the card issuer. The call is routed through an IVR system, which is often unpleasant and inconvenient for the user, before hopefully reaching a company representative. Customers are then only credited with the cost of the fraudulent purchase if they successfully convince the representative that the fraud is genuine. The merchant is then billed with a chargeback fine, while the issuer blocks any further use of the credit card, and the card must be replaced with a new one. The cost of this entire process exceeds $100.
Paygilant’s Streamlined Approach Paygilant's technology is designed to protect mobile wallet financial transactions, either executed by NFC, QR Code or online, against fraudulent attacks. The vast majority of fraud attempts are detected and blocked on the mobile device in real-time prior to the completion of the transaction. In addition, Paygilant enables a friction-less customer experience during the transaction, triggering an immediate authentication, only upon a suspicious fraudulent attempt. This enables mobile wallet providers to gain a significantly increased fraud prevention while enhancing their customers experience and cutting operational costs.
Payment Approved w/o Veriﬁcation Wallet receives Transaction details
Paygilant Fraud detection
Veriﬁed Transactions (8%)
Wallet conﬁrms transaction
Solution Overview Paygilant’s Ultra-Light fraud detection technology and model work through the backend of the mobile wallet. By processing historical and real-time data, the system generates user-specific behavioral maps and develops highly accurate detection algorithms that are used by its SDK during the wallet transaction. This unique analysis technology supervises the activity of all credit, debit, cash, gift and loyalty cards or any other payment means approved for use by the mobile device. This method enables increased accuracy and detection rates, compared to a traditional off the shelf or in-house back office fraud prevention system. Paygilant’s unique capabilities stem from the fact that the fraud detection and authentication, occur on the mobile device itself. Suspicious transactions are immediately validated by multiple authentication means during the payment process, without involving a costly, uncomfortable call center / SMS process. The chart above demonstrates how Paygilant enables the majority of the transactions to be processed without an authentication, while triggering on-the-spot intervention and prevention of fraudulent financial mobile-based transactions. The risk-based process which is derived from Paygilant’s accurate personal heat-maps, immediately approves the genuine user transactions, eliminating most of the friction that users currently experience. Only the remaining suspicious transactions require verification, which fraudsters will fail to pass successfully and the fraud will be prevented. Paygilant’s technology is based on a multi-dimensional database which utilizes the historical transactions of the customer, general population and real-time indication provided by the mobile device. It has been meticulously condensed into multiple Two-Dimensional Miniature DOF (Depth of Field) maps, which are tailored per customer based on their personal purchasing behavior.
A map resolution is created for each transaction. High resolution is used in areas of the map where the customer is normally active, while low resolution is used in areas where the customer has no transactions. This enables Paygilant to zoom in on high-risk transactions and trigger an authentication only when required, without compromising on user and device performance. In the absence of transaction history (New Mobile-Wallet users), Paygilant analyzes the user’s name, email, address book, GPS history, and any other factors that the user is prepared to share with the Mobile-Wallet app. Equipped with the information, as well as what can be publicly be gleaned from social media networks, the system is able to draw conclusions about the customer’s individual lifestyle.
This lifestyle profile, in conjunction with regional data, allows customers with similar behavior to be accurately identified. Those customers' behavioral maps can then serve as a basis for the initial maps of the new user. Each new transaction adds more depth and higher resolution to the initial maps, lifting the prevention of mobile wallet fraud. Below are some examples of the behavioral mapping:
Fraud + Suspected
Paygilant’s Unique Advantages
• The only mobile-based fraud detection solution which utilizes personal behavioral maps, generating unparalleled accuracy. • Paygilant triggers an authentication only upon an immediate and tangible fraud attempt, based on the actual risk associated with the transaction. This improves the customer’s experience and enables a positive adoption rate. • A complete protection for all credit, debit, cash, loyalty and gift cards or any payment means approved for use by the mobile device. This comprehensive analysis allows Paygilant to identify and prevent fraud more effectively across multiple channels. • Paygilant analyzes every single mobile wallet transaction on the mobile device prior to the transaction taking place. Thereby removing the back-office capacity limitation and significantly reducing the associated cost.
Contact: POB 54001 HaUniversita Street TelAviv, 61392, Israel
Phone +972 (3) 5221 879 Fax +972 (3) 5221 811 [email protected]