4 Reasons Why Mobile Payments Are Risky

Mobile Payments Challenges, Risks, and Solutions

The expected rapid growth of the mobile-payments market will create a potential “cocktail” of different risks that pose new challenges for risk managers and other players in the sector.

That’s one finding in new research from RiskSkill, a corporate risk prevention consultancy, and a division of UKFraud.

Riskskill studied developments in the mobile-payments arena, including all types of mobile payment services – mobile money and mobile wallets – which are subject to financial regulation and performed from or by mobile devices. The consultancy has identified some key risk areas:

1. The scale of sector growth and technology change. Riskskill says many risk professionals are concerned about projections that the mobile-payments business will reach $1 trillion in global transactions by 2015. That growth could mean that many proven risk strategies, once thought of as realistic and elastic, could be left out of touch in the medium term and lack the solid infrastructure required to be able to accommodate such growth.

2. The globalization of mobile payments. The explosive growth of m-commerce in China, India, Latin America and the Far East are a concern, Riskskill says. Recent data from the ITU (International Telecommunication Union) points to global mobile subscriptions now reaching 6 billion. In some of these newer areas, the mobile-payments sector is compensating for the lack of a physical and sufficiently robust banking structure and therefore proves extremely popular. Consequently, while the growth figures are impressive, the rate of growth could draw into question whether the existing and, on occasion, young nascent regulatory systems and controls are sufficient to cope.

3. Consumer communication and information risks. Riskskill says the sector consists of a continuous stream of new financial products that are all seeking to outdo each other in the eyes of providers and consumers. Alongside other areas of rapid market change, a fast churn of product lifecycles and the sheer variety of product nomenclature might cause consumers to become confused, and thus more vulnerable to fraudsters exploiting their confusion. This will also be compounded by the absence of adequate fraud systems which will not have been put in place by all the main players, at an early stage, as some will only just have kept up with competitive product development, Riskskill advises.

4. Are standards and regulation outpaced? The impact of this rapid technology evolution could threaten the applicability and implementations of many existing standards programs. Other newer standards will need to be evolved, although these too might still struggle to keep up with the rate of change.

“It is easy to plan for many risks individually – however, the wide and varied nature of the risks associated with the changing and rapidly growing mobile payments sector creates a whole array of risks that will challenge even the best of plans and strategies for addressing problems within the mobile payments sector,” said Riskskill CEO Bill Trueman. “This is a simply enormous issue to address. Organizations and indeed many governments are often now too ‘silo based’ to evolve direction and protection from the attacks in a market that is so rapidly evolving. The ideal solution for leading sector stakeholders should be to drive proper standards through appropriate bodies that will in turn drive both a governmental and a business response globally. It’s a tall order and only time will tell if it is possible.”


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