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This Black Friday Season, Pay Attention to Mobile

This post was initially posted on Bianca's Linkedin on Nov. 22. You can follow her here.

Mobile Commerce.jpgWith the winter season fast approaching, it’s time to start thinking about holiday shopping. If you’re thinking about heading out into those overcrowded stores, think again. Mobile shopping is trending and just might be the way to go. 

In fact, bricks and mortar spending is lower than ever – falling by over 10%, from $11.6 billion in 2014 to $10.4 billion in 2015, according to ShopperTrak. On the other hand, online spending is becoming increasingly popular, with $2.74 billion in online sales. 

Top analysts at Statista estimate that mobile sales represent a 36.16% share of online sales, up from 27.9% the year before.  

Another major shopping date in the U.S. is Cyber Monday (happens to be this coming Monday (Nov. 28th)!) – in which all sales occur online. Much like Black Friday, consumers are beginning to show a preference for mobile shopping vs traditional desktops computers. In fact, mobile sales increased by 53%, reaching $838 million in 2015. Although both Android and Apple smartphones have contributed to these numbers, Android sales have accounted for less than 1/3 of Cyber Monday m-Commerce. In total, last year’s Cyber Monday surpassed $3 billion in digital sales, to make it the heaviest U.S. online spending day in history. 

Of course, most buyers are motivated by the impressive sales held on these days – with an average discount of 24%, customers have been spending about $124 per transaction, according to CNN Money. Although possible to score the same deals in-stores, researchers believe the digital will continue to overshadow bricks and mortar, simply because of the convenience. Payment methods across the U.S. are anything but consistent. The EMV -- which stands for Europay, MasterCard and Visa -- rollout has been a disaster. Especially considering that only 25% of U.S. debit cards were issued an EMV chip by the end of the 2015, and is only expected to reach 57% by the end of this year. But still, this doesn’t mean they’re being used. 

Another report by the EMV Migration Forum states that approximately 5 million EMV-ready terminals are in U.S. stores right now, but only 1 million can actually accept and process chip card payments. They say 50 percent of terminals will be enabled by the end of 2016, and 90 percent by the end of 2017. 

 

Two things come to mind here: 

1. Transaction time – For those actually using the EMV chip, the customer experience is worsening, as it takes more time to process due to the added PIN. Although the average time is about 15 seconds, all together can account for hours of lost time, especially with the long line-ups seen on Black Friday. 

Some companies have begun streamlining this process - Visa with its new Quick Chip for EMV and Walmart, who’s successfully reduced checkout time by 11 seconds. But, the reality is, it could be months before we see it deployed on larger scale. For now, we can assume most retailers are still in the process of adopting the standard EMV chip. 

2. Fraud – Whenever an EMV chip is used, a unique transaction code is created, which cannot be used again. The traditional card, however, has no way to protect account holders in this way. Without EMV, over 43% of transactions will still be susceptible to security threats, this year. "If someone copies a mag stripe, they can easily replicate that data over and over again because it doesn't change," says Dave Witts, president of U.S. payment systems for Creditcall, a payment gateway and EMV software developer. To put this into perspective, payment data was stolen from about 70 to 110 million Target customers who shopped in its U.S. stores from Nov. 27 to mid-December 2014, before EMV was deployed. Around that time, 

Georgetown law professor Adam Levitin, an expert in financial regulations, said “Fraud will always find the weakest link. Now that the rest of world has gone to chip-and-PIN, we’re the weakest link.” And as it turns out, the U.S. is still the weakest link, being the slowest to convert to EMV.  

When we compare EMV to mobile commerce, the difference is staggering. According to iovation, the trusted source for mobile and online fraud prevention, e-commerce fraud actually decreased on Black Friday. Only “1.06% of all retail online transactions from Black Friday to Cyber Monday were fraudulent, compared to 1.25% during the rest of 2015”. And mobile specifically, was even lower, with about “0.62% of mobile retail transactions over the 4-day holiday weekend” considered fraudulent, compared to 0.73% during the rest of the year. For some this may come as a surprise, seeing as experts were predicting more fraud to move online as a compromise to the EMV adoption in 2015. 

 

So what did these retailers do right? 

Many are taking action to distinguish between mobile and desktop spending, sometimes even creating separate fraud prevention practices, as 7 out of 10 merchants believe it’s necessary. 

 

Another trick? 

Applying third party API’s. 

Technology like machine learning algorithms can scan merchant’s transaction data and indicates the possibility of a fraudulent purchase by scoring each one. Other systems can even process enterprise data to create risk-engines for real time fraud prevention. 

When basic human security gaps are most often the highest risk to m-Commerce, this is becoming more and more necessary. According to research by Kount, “34% of users don’t lock their devices, those who do, most of the time (34%) set a four-digit screen lock, and the majority (62%) use a common, hackable code such as 1-2-3-4”, making it easy to hack into accounts through their devices.  

So maybe we can learn a thing or two from holiday shoppers after all, seeing as they’ve shown us online and mobile payments can be convenient AND secure, when deployed the RIGHT way. 

 

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