Mar 21, 2013 Dave King
Recent buzz surrounding the mobile payments sphere indicates that the industry is poised for significant growth within the next few years. IDC Financial Insights conjectured that mobile payments could surpass $1 trillion by 2017, an astounding figure considering that it wasn't too long ago that these transactions were uncommon at best. Today, companies must focus on how to support the high demand for advanced purchase technologies. Even as many consumers warm up to the idea of using mobile devices to buy everyday items, there is a significant potential for growth to stall if developers and vendors don't work together to solve looming data security threats.
Mobile payments security is a pressing concern worldwide
According to PYMNTS.com, a recent study from Auriemma Consulting Group (ACG) found that the development of stronger security technologies is likely to be a driving factor behind whether the mobile payments industry expands to predicted levels. The United Kingdom-based firm discovered that users feel safest if, when activating an app or other mobile transaction solution for the first time, they are required to go through an authentication process, rather than just entering a username and password.
In addition, 35 percent of consumers told ACG that they would like to see apps allow users to customize their security measures based on the amount of the purchase. Of those that would like to see these tools instituted, 50 percent said they would be more likely to make mobile purchases.
"This research highlights that the barrier to mobile payments adoption is not necessarily technology or user experience, it's about creating the right marketing messages to reassure consumers that this is a safe transaction channel," Matt Simester, Managing Director of ACG, told PYMNTS.com. "If mobile payments stakeholders truly want to increase the use of mobile payments, they need to create segmented strategies based on sales ticket size and customer preference."
In another recent study, the Federal Reserve Bank of Boston also accentuated the importance of security in the success of the mobile payments industry. The financial institution noted that may users are unsure of the safety of their sensitive information and the ways in which it can be compromised. Consumers need to be confident that initiating transactions or losing a device does not place their data at risk, and it is the responsibility of financial institutions to put them at ease.
The impact of data loss and how to overcome it
Consumers and businesses are right to worry about the safety of their personal information. In many cases where sensitive data falls into the wrong hands, the effects are devastating and long-lasting. If a criminal makes unauthorized credit purchases using account data taken from a mobile payments tool, individuals may see the quality of their consumer credit report take a dive, and this could subsequently make their lives more difficult. Without a strong credit history, it is possible that they will find themselves denied for everything from retailer-specific cards to housing to loans necessary to start a business.
While prevention is key to saving consumers from major setbacks, it is not impossible for them to recover. In response to more people using mobile payment solutions, it may be important for businesses and loan providers that support alternative credit data to advertise how their approach to credit can be helpful to consumers who may otherwise find themselves at a disadvantage.
In addition, prepaid purchase options like ACH cards can represent an opportunity for the public to use mobile payment technologies in a lower-risk manner. While these cards are still targeted by some criminals, less personal data is connected to them. If merchants and developers expand their services to integrate more prepaid technologies, they may be able to tap into a market of consumers who want to use high-tech payment solutions but are hesitant to tie their sensitive information to traditional financial services.