As more users adopt them, fully digital payment methods like e-wallets are becoming increasingly vulnerable: fraud can creep in before and during transactions.
More than 140 million people adopted digital wallets in 2019 globally. This number is only projected to increase in the coming future as consumers continue to shift towards buying from online retailers rather than brick-and-mortar stores. Each year, physical credit and debit cards become more and more unnecessary.
If your business accepts payments from digital wallets (like Apple or Android Pay), it's critical that you have the proper security measures in place to ensure safe transactions for your customers.
In this article, learn about how you can effectively protect your customers from the threat of digital wallet fraud.
What Is a Digital Wallet?
A digital wallet offers businesses the ability to collect payment from their customers without having a physical credit or debit card present. There are three main technologies that digital wallets utilize to process payments:
- Near Field Communication. This is a short-range wireless technology that allows two devices to exchange payment information when in close proximity to each other. Apple Pay is an example of a digital wallet that uses this technology to send payments.
- Magnetic Secure Transmission. Is a wireless technology that generates a magnetic signal similar to that of a traditional payment card when swiped. Samsung Pay uses a combination of MST and NFC technology to send payments.
How Safe are Digital Wallets?
The question on every consumer's mind regarding digital wallets is, "Are they safe for us to use?" For most people, in most situations, the answer is: absolutely. But there are exceptions.
Defrauding a digital wallet provider can earn fraudsters a lot of money. Just like a physical wallet, they contain private information that can be stolen if not properly safeguarded. If a fraudster successfully cracks into a digital wallet, they can steal funds from the owner and illegally mine private data.
So what is being done to prevent digital wallet fraud? Unfortunately, while the Federal Trade Commission is trying its best to keep up with the latest methods of CNP fraud, they're still focusing primarily on money wire fraud and gift card fraud. They're a few years behind being able to properly protect digital wallets from organized fraud attacks.
What about private watchdog organizations? The Better Business Bureau does have great advice about what scams and fraud to look out for, as well as ways to deal with them. Still, though, it falls short with slow responses while the fraudsters have moved on to other or more sophisticated means.
The answer to digital wallet fraud lies in machine learning and artificial intelligence. Algorithms armed with petabytes of usage data can identify and stop scams before they occur, rather than after the fact. Payment fraud detection in real-time is a modern-day miracle of data science and technological progress.
How Do You Protect Digital Wallet Payments?
Any digital wallet that enforces 2-factor authentication will automatically have a security advantage over those that do not. Although it isn't a commonly-used or adopted authentication tool for digital wallets, it's very effective when it does get used. Unfortunately, 2FA for digital wallets hasn't taken off as much as digital giants like Google hoped (only a 10% adoption rate in 2018).
More recently, Google has bitten the bullet and decided to make it mandatory on Google accounts in upcoming weeks and months. This affects digital wallets like G Pay (formerly Android Pay) and Google Pay, but not others like Samsung Pay, PayPal, Apple Pay, or Venmo.
The truth is, if you want to feel completely assured that the payments processed by your digital wallet are protected, you should consider partnering with a fraud solution provider that understands the complexities of preventing digital wallet fraud.
Vesta's Payment Guarantee solution will enable you to layer account protection (like 2FA) on top of fraud prevention for a full suite of solutions that address the core causes of digital wallet fraud. We can help you provide your customers with a quick, seamless transaction that enhances the benefits of digital wallets — while increasing your approval rate to up to 97%.
Eliminate the Risk of Digital Wallet Fraud
There's no denying that digital wallets will continue to become the norm for completing in-person and online transactions. If you're dealing with complications from digital wallet fraud now, imagine what it'll be like in a few years when the number of users around the globe increases tenfold.
If you're interested in learning more about Vesta's suite of fraud solutions, request a demo of our platform and we'll walk you through how we've helped other digital wallet providers eliminate the risk of fraud.