We live in an age of accelerated technological advancement. With everything they need right at their fingertips, Millennials are having a major influence on a rapidly evolving consumer landscape. A force of 80 million Americans born between 1981 and 2005 with real spending power increasingly prefer mobile payments via smartphones and tablets over brick-and-mortar shopping. Gone are the days of hanging out at the mall. This trend is changing not only the way merchants must connect with customers, but how goods and services are being bought and sold on a grand scale.
Convenience is king
Millennials are opting to shop and bank from their mobile devices because they view it as much more convenient. Millennial behavior illustrates just how important convenience is … and just how ambivalent they are to security concerns. A survey conducted by TransUnion, one of the nation’s major credit reporting agencies, showed that while nearly half of Millennials are very concerned about cyber crime, their behavior says otherwise. According to the survey, 86 percent store bank account information on their phones and 84 percent report checking their financial accounts on public Wi-Fi. What’s more, 67 percent don’t password protect their phones.[1]
The logical conclusion is that Millennials feel like their banks will keep their account information safe, and that same sense of security carries over to shopping, whether that’s via mobile browser or a native app. This means merchants must be agile in the changing technological landscape and quickly identify and stop fraud in the growing mobile payments channel.
“Merchants should be concerned with the security of the devices the customer is using to purchase from their site,” Verifi Vice President of Business Development Chris Marchand said. “Security on a mobile device differs from the hardware and the software that is being used. A lot of the purchases that occur via mobile payments are done on unsecured wireless networks which could also present risks to the merchant. This could push some type of malware to the merchant and compromise the security of their data.”
Marchand said it’s common to see potential security issues anytime a new tool or process is developed with the intent to make things faster or easier.
“It’s a tough balance for a merchant to maintain when offering the convenience of mobile payments to the customer but also need to address the security concerns,” Marchand said. “Bottom line is, the mobile device was never designed for data security. They were designed to make things easier and more fun for the consumer. They’re user experience driven.”
Mobile Payments: Take the good with the bad
Merchants who have developed strategies to reach these always-connected Millennials are reaping the benefits. In fact, a Hanover Research report shows that 52 percent of Millennials live by the “buy now, deal with it later” way of thinking. That is, Millennials are impulse buyers. Throw in the fact that 56 percent are willing to share their location in order to receive quick deals from nearby businesses, and the chances of reeling them in gets that much better.[2]
While hyper-targeted marketing strategies directed at Millennials through their mobile devices have shown to be good for business, merchants still must be aware of the numerous security threats that arise in the mobile transaction arena. Mobile payments are gaining popularity, but many security professionals see a number of vulnerabilities.
Global cybersecurity association ISACA released its 2015 Mobile Payments Security Study[3] after surveying 900 cybersecurity professionals, and their opinions suggest that security lags behind rapidly advancing technologies.
Of those polled, 87 percent believe there will be an increase in mobile payment data breaches over the course of the next 12 months. Forty-seven percent said they do not feel like mobile payments are secure, and only 23 percent think mobile payments are secure in keeping one’s personal information safe.
The need for merchants to maintain pace with fraudsters is apparent.
Julie Conroy, Research Director of Aite Group, says “While mobile fraud is still dwarfed by online fraud, criminals are well aware of the rapidly increasingly transaction volume passing through the mobile device, and we’re seeing them ramp up attacks targeting the mobile channel, from malware to SMiShing to account takeover.”
Conclusion
Millennials have made their digital mark on payments. Their preference for mobile payments is clear, but their disregard for security makes mobile a lucrative—yet risky—channel.
“You could definitely make the argument that mobile is less secure, which means more fraud, which means more chargebacks,” Marchand said. “Depending on user interface and experience, there could be unintended purchases. The ease of use and ability to purchase an item could also result in greater buyer’s remorse. Friendly fraud is easier, ‘I didn’t make that purchase,’ or ‘Someone stole my phone or tablet.’ ”
Mobile will create additional opportunities for omni-ready merchants to capitalize on this generation’s craving for convenience, but those merchants will need to ensure their security and fraud prevention game is on point. While these new money streams are attractive to tech-savvy merchants, they’re also attractive to shrewd fraudsters ready to pounce on unsuspecting victims.
Merchants (and issuers) must remain vigilant in securing payments from end to end and across all channels. Outsourcing can be a viable option for merchants who don’t have the internal staff or resources to implement a comprehensive fraud strategy on their own. Working with a vendor to create a layered fraud prevention system that can be tested and toggled to meet each merchant’s custom needs is ideal, not only for securing data, but also for reducing and stopping chargebacks.
For a closer look at how Millennials are shaping the way transactions are completed, the “Do you have what the $200 billion Millennial consumer base wants?” white paper from Verifi, Inc. has more helpful information.
[1] http://www.infosecurity-magazine.com/news/millennials-are-cyberslackers/
[2] http://www.hanoverresearch.com/wp-content/uploads/2013/06/Millennials-Infographic-Final1.jpg
[3] http://www.isaca.org/SiteCollectionDocuments/CSX-Mobile-Payment_whp_eng_0915.pdf