With mobile internet and products like Square making it easier than ever, small-and-medium sized businesses are jumping on the mobile payment trend. The situation smacks of an old science-fiction story where the two people engaging in a business transaction hold out their payment devices and the money transfers automatically from one to the other.
And that’s why it’s so attractive - the whole process is fairly quick, simple, and allows both parties to get on with business. More and more businesses are turning to this as an option, especially those that can move around from day to day or might not have enough cash available regularly to make change. Seems like a no-brainer, right?
You Probably Aren’t Prepared For The Risks
According to a study on businesses that use mobile payments for regular transactions, whether through a checkout app or a card reader for smartphones, smaller businesses only use about 50% of the fraud prevention tools available that larger businesses use.
A PIN and a signature aren’t enough sometimes, and big companies know this, which is why they employ more back-end tools that look at malware, IP address, and customer databases. These checks are necessary to detect fraud in the case of identity theft particularly, something that non-customers will be thankful that you were able to flag.
But these are just risks that recognized brands have to worry about, right? At the end of the day, a fraudulent payment is going to go to you, and worst case scenario, you have shrinkage on one order. Or so you think.
The same study determined that for every fraudulent transaction that occurred, the company involved lost three times the cost of the stolen merchandise. All the fees for a card chargeback, replacing merchandise, and investigating the fraud have to come from somewhere, and if you weren’t doing your part to be vigilant against fraud, it’s probably your pockets that are going to be lighter.
So by now, you’re ready to close down mobile payments entirely to protect yourself right? Before you do, consider the ways you might be crippling your business.
How Mobile Payments Open New Opportunities Overnight
First and foremost, the more options your customers have when purchasing from your store, the more likely they are to do so. Imagine if there were two grocery stores an equal distance from your house, with the same stock and the same prices, but one of them only accepted cashier’s checks. Odds are you usually don’t walk around with cashier’s checks burning a hole in your pocket for the exact cost of your groceries, so you’d go to the other store and use cash, a debit card, or write a check.
Your customers want the same kind of flexibility, and mobile payments give you the freedom to offer that even if you’re a Day 1 startup.
Mobile payments are also usually tied to database tracking that can help you identify trends in items purchased or if a certain item needs to be restocked before you run out. This keeps your business moving and customers coming in the door. Additionally, mobile payments require a fair amount of information exchange, so you can use the opportunity of a customer having their phone out to opt-in to a loyalty program, giving you more visibility and them concrete rewards for shopping with you.
Nothing’s ever black and white or completely without risk, and that certainly includes mobile payments. The risk of fraud goes up as you open your doors to different kinds of customers and transactions, but you can combat this risk by installing as many safeguards as is sensible for both your business and your customer.
After all, at the end of the day the whole point of mobile payments is convenience for all parties involved, and you never know when that might include the person whose credit card a fraudster is trying to use to buy your products.