Ellen Cibula
Written by Ellen Cibula Payments, Finance, and AI Expert: Learn More

Are you worried about mobile payment fraud and how it could hurt your business?

With experience I gained at a payment processor, I know first-hand the risks that businesses face from mobile payment fraud. That’s why I wrote this post. It dives deep into the different types of fraudulent activities and outlines eight strategies for mitigating them. There are also helpful actionable tips to get you started right away!

With my insights and advice, you can confidently protect yourself from cybercriminals. You don’t want fraudsters stealing customers’ information or costing your company valuable funds—so make sure to read this post before any of that happens.

Keep reading to take advantage of these useful tips today!

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What is Mobile Payment Fraud?

featured image for mobile payment fraud

In the world of mobile payments, you might encounter various types of fraud that can impact your revenue and overall user experience. Mobile payment fraud is growing faster in the mobile ecosystem than anywhere else, with iOS and Android devices now accounting for 51% of all online fraudulent activity.

Keep in mind that mobile payment fraud is a complex issue that primarily shares the same types of vulnerabilities as e-commerce. You can implement tailored solutions and technology to mitigate risk and safeguard your revenue by identifying key fraud challenges specific to your situation.

Common Types of Mobile Payment Fraud

Account Takeover

Account takeover is a type of mobile payment fraud where hackers gain unauthorized access to customer accounts using stolen credentials or malware attacks. Once they obtain control, they might make unauthorized transactions or transfer funds to their own accounts.

Tips to mitigate account takeover
  • Require strong and complex passwords on user accounts.
  • Implement Two-Factor Authentication (2-FA) or Multi-Factor Authentication (MFA) and force users to use them. These methods require users to verify their identity through multiple means, such as a password combined with a fingerprint or a code sent to their mobile device. 

These make it considerably harder for unauthorized individuals to access accounts, significantly reducing the risk of account takeover. 

Friendly Fraud

Friendly fraud, a type of chargeback fraud, is another common type of mobile payment fraud. This occurs when a consumer makes a purchase, receives the product or service, but then disputes the charge with their credit card company, effectively receiving the item for free.

Tips to mitigate friendly fraud
  • Implement robust tracking systems to ensure they have evidence of delivery or service provision.
  • Maintain clear and transparent communication with customers about terms and conditions, return policies, and charges to help prevent misunderstandings that lead to friendly fraud.
  • Employ fraud detection tools that flag suspicious activity, such as multiple orders from the same IP address or unusually large purchases.

This can help you identify potential cases of friendly fraud before they become an issue.

Phishing Attack

In a phishing attack, cybercriminals pose as a trustworthy entity, such as a bank, and send emails or text messages to trick consumers into revealing sensitive information like login credentials or payment details. These attacks often redirect users to fake websites that appear genuine, making it easier for fraudsters to obtain their information.

Tips to mitigate phising fraud
  • Educate customers about the risks and signs of phishing attacks. 
  • Encourage them to be wary of unsolicited communications asking for personal information and to double-check the source before clicking on any links or attachments. 
  • Use secure email gateways that can identify and block phishing emails before they reach the user’s inbox. 
  • Implement 2FA or MFA to make it harder for fraudsters to gain access even if they manage to obtain a user’s login credentials.

Identity Theft

Identity theft is a type of mobile payment fraud where personal information like date of birth, Social Security number, or credit card information is stolen and used to carry out unauthorized transactions, apply for credit, or create fake accounts in the stolen name.

Fraudsters obtain this information through dumpster diving, mail theft, data breaches, or social engineering.

Tips to mitigate identity theft
  • Implement stringent data protection protocols to help safeguard customer information. This includes encrypting sensitive data, regularly updating security software, and conducting frequent audits to identify potential vulnerabilities.
  • Use identity verification services to help confirm the authenticity of a user. These services cross-reference user-provided information with various databases to verify their identity.
  • Monitor for unusual activity, like sudden changes in purchasing behavior or multiple failed login attempts. This can help detect potential cases of identity fraud early on.
  • Educating customers about safe online practices and encouraging them to regularly monitor their account activities can further prevent identity fraud.

Synthetic Identity Fraud

Synthetic identity fraud involves criminals creating new identities using real and fabricated information. They then use these identities to open fraudulent accounts and make purchases.

Tips to mitigate synthetic identity fraud
  • Implement advanced identity verification methods that cross-verify user information with multiple databases.

Communication and Customer Support Fraud

Fraudsters pose as customer support representatives to trick users into revealing sensitive information or making unwarranted payments.

Tips to mitigate customer support fraud
  • Regularly educate customers about the correct channels for customer support and warn them about potential scams. 
  • Use secure communication platforms and verify customer identities before discussing sensitive information.

Subscription Fraud

Fraudsters use stolen credit card details to sign up for recurring services or subscriptions.

Tips to mitigate subscription fraud
  • Monitor for suspicious activity like multiple subscription sign-ups from the same IP address or using the same card details. 
  • Implement strong customer authentication processes.

Stolen Device Fraud

What if a device with mobile payment capabilities is stolen? Unfortunately, it can be used for unauthorized mobile payment transactions until the device is deactivated or the user changes their login details.

Tips to mitigate stolen device fraud
  • Encourage users to protect their devices with strong passwords or biometric authentication. 
  • Offer a quick and easy way for users to report lost or stolen mobile devices and immediately deactivate their accounts.

Preventing Mobile Payment Fraud

Security Measures to Protect Consumers

Ensuring customer safety during mobile transactions is crucial. There are several security measures you can adopt to strengthen mobile payment security:

  1. Select a secure payment processor and ensure they follow stringent data protection standards.
  2. Encourage your customers to enable biometric identification on their mobile devices.
  3. Make two-factor authentication (2FA) or multi-factor authentication (MFA) the default on your mobile payment apps and your payment gateway. This will force your users to use 2FA/MFA when using your apps.
  4. Enforce the use of strong, complex passwords and encourage regular password changes.
  5. Regularly update security software to protect against the latest threats.
  6. Detect the mobile browser being used and prevent transactions from insecure browsers.
  7. Maintain secure systems with techniques like zero-trust architecture.
  8. Comply with PCI-DSS standards.

Fraud Detection and Machine Learning

Fraud detection is a crucial aspect of preventing mobile payment fraud. Machine learning (ML) has emerged as a powerful tool in identifying and combating such fraud. By analyzing vast amounts of data, ML algorithms can spot patterns and detect unusual activities that indicate potential fraud.

Financial institutions and mobile payment services increasingly employ ML techniques for fraud detection. These AI-based systems learn from previous transactions and user behavior, enhancing their accuracy and effectiveness over time. Using AI-driven fraud detection ensures that both you and your financial transactions are well-protected.


Mobile payment fraud is a multi-faceted problem that requires a comprehensive and proactive approach to effectively combat it. From phishing and identity fraud to more sophisticated synthetic identity and customer support fraud, you must stay informed about the evolving threats and implement robust security measures accordingly. 

By employing strong user authentication methods, advanced identity verification services, regular security updates, and educating customers about safe online practices, you can significantly reduce their risk of falling victim to these fraudulent activities. 

Remember, a secure business not only protects its financial interests but also earns the trust and loyalty of its customers, which is invaluable in today’s digital age. 

Stay vigilant, stay updated, and stay secure!

Questions? We Have Answers.

Get answers to a list of the most Frequently Asked Questions.

To protect yourself from mobile payment scams:

  • Keep your mobile device secure.
  • Always verify the recipient’s identity before sending money.
  • Use strong, unique passwords for your payment apps, and set up multi-factor authentication if the app offers it.
  • Be cautious when clicking on links in emails or texts from unknown senders.
  • Don’t share sensitive information with anyone, such as your login credentials or bank account number.
  • Monitor your payment app transactions regularly and immediately report any suspicious activity to the app’s customer support.

Some warning signs of mobile payment fraud include:

  • Unsolicited emails or texts urging you to click on a link, open an attachment, or share personal information.
  • Requests for payment from unknown or unverified contacts.
  • Unusual transaction amounts or patterns on your payment app history.
  • Emails claiming your account has been compromised and asking for your password or other sensitive information.

Always trust your instincts and be cautious when dealing with unfamiliar contacts or requests for payment.

If you suspect fraud on a payment app, immediately contact the app’s customer support to report the issue. Provide as much information as possible about the transaction, including the date, amount, and recipient.

Also, notify your bank if your linked bank account or credit card was involved in the fraudulent activity. Finally, you can file a complaint with the Consumer Financial Protection Bureau to report the issue and seek assistance.

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