How Small Businesses Can Fight Mobile Fraud

March 30, 2016

Owning a small business can be an exciting and rewarding adventure, but it also comes with difficulties. This can be especially true when it comes to fraud.

In the midst of managing a small business, it can be hard to think of everything. Fraud prevention and detection may be at the end of a small business owner’s to-do list. A larger issue is when businesses are aware of fraud, but don’t take action. Many small business owners think they aren’t a target of fraudsters. They may think fraudsters are only going after the large businesses who are more well-known and have more money. In fact, 77% of small businesses believe they’re safe from fraudsters.

The truth is, fraudsters are smart. They know small businesses aren’t investing in fighting fraud. They know they’re likely to get by undetected. They are also counting on the fact that small businesses are using outdated fraud prevention methods that don’t work. Fraudsters can easily jump through commonly used authentication methods like password protection to access a customer’s account.

This leaves small businesses with a hefty bill courtesy of the fraudsters. For a new business, this bill can make a huge impact on the health of the business. We’ll go through what makes small businesses different when it comes to fighting fraud and how small businesses can invest in strategies to protect themselves.

Small vs. Large Companies


There are several reasons small businesses are at a disadvantage when it comes to fighting fraud.

Quite simply, small businesses often don’t have the breadth of resources large companies have. They might not have a dedicated employee whose focus is on fighting fraud. They also don’t have the capital needed to invest in expensive fraud solutions. This lack of resources can pose a problem when it comes to fraud prevention, although we’ll talk later about an affordable and simple solution for businesses.

A lack of resources is compounded by the fact that small businesses are disproportionately targeted by fraudsters. 32% of companies with less than 100 employees reported fraud, compared to 20% of companies with at least 100 employees. This is even larger when it comes to cyber fraud. A whopping 60% of cyber-attacks in 2014 hit small businesses.

The vulnerability of a small business also depends on the type of product being sold. Small businesses that sell luxury or digital goods have an increasing risk of fraud attacks.


2016-02-19_13-36-28 From Global Fraud Attack Index report


Larger businesses tend to have stronger controls to fight fraud, giving them a significant advantage when it comes to deterring fraudsters. Small businesses are more likely to forgo fraud prevention strategies all together, leaving the business incredibly vulnerable. This is especially true for online and mobile threats. 80% of businesses have no controls in place to protect against cybercrimes. This sets them up for significant fraud losses.

With little defense and a giant target over them, small businesses are particularly vulnerable to the devastating effects of fraud, as losses makes up a much larger percentage of total revenue. The losses from fraud can lead many small businesses to close up shop.

According to a report by the Association of Certified Fraud Examiners, businesses tend to lose about 5% of annual revenue to fraud. This amount is larger for small businesses. Small businesses lose an average of $147,000 a year to fraud. This is compared to $100,000 a year for companies with 1,000 to 10,000 employees.

Businesses often don’t recoup this loss, as they lose product and must pay back banks for repaying customers. When it comes to reducing fraud, it’s the responsibility of the small business to prevent fraud in the first place. This obligation can leave small businesses overwhelmed.

Another problem is how long fraud schemes targeting small businesses persist before detection. Since small businesses don’t often have proper controls in place, fraud is more likely to endure for longer periods before it is detected. According to a 2016 report by, the typical transaction amount for each attack is around $100. Even though this doesn’t sound like a lot on its own, fraudsters who continually take $100 can rack up a large sum. The more a fraudster can attack and the longer they go undetected, the more money is lost. Persisting fraud attacks result in more devastation for a small business.


pymts From Global Fraud Attack Index report


The problem of fraud is compounded by a general lack of education about fraud. Employees at small businesses are less versed in fraud prevention, with only 18.5% of companies educating employees, compared to 60% of large businesses.

If small business employees aren’t aware of fraud and how to recognize it, they can’t defend against it. Many small companies don’t have a formal fraud strategy for employees to learn. Education is important for understanding fraud and staying atop new trends. There are many free online resources small businesses can take advantage of to learn more. For small businesses, basic employee education can go a long way.

Another issue is few small businesses take the time to learn how fraud is affecting them. Only 56% of businesses with fewer than 100 employees perform external audits to address the costs of fraud. This is compared to 91% of businesses with more than 100 employees. Checking in with your fraud fighting strategy and getting an outsider perspective is an important way to decide whether your fraud prevention strategy is working or could use some freshening up.

These hurdles leave small businesses in a vulnerable position. They are less prepared with resources and knowledge to defend against fraud and adapt to the evolving ways of fraudsters. This can be a recipe for disaster.

If you’re a small business owner, it can be easy to look at these hurdles and feel doomed. The difficulties shouldn’t leave small business owners shaking in their boots, though. There are effective ways to fight fraud that are suitable for small businesses and keep up with modern fraud trends. With education, small business owners can attack threatening fraud from the most vulnerable channels.

Fighting Fraud in a Mobile World

One area getting a lot of attention in the world of fraud is mobile. This channel is becoming exceedingly important for important for businesses, especially small ones. This is because people are increasingly using mobile devices to complete shopping and banking.

A huge percentage of the United States adult population (71%) owns a smartphone. 29% of mobile users have made an online or in-app purchase from a mobile device. On average, consumers spend 6.4 hours a day on mobile devices. This represents an important demographic for all businesses.

In the digital world, small businesses can emerge from nothing and become giants. “Going mobile” can improve small business efficiency and provide new avenues for expansion. The mobile environment helps small, local businesses have a greater reach and sell more product.

With the growth of mobile, fraud that occurs through this channel is expected to grow. The mobile platform presents new vulnerabilities for fraudsters to exploit. According to Symantec, these vulnerabilities are increasing. They found that 17% of all Android apps were actually malware in disguise. This is almost one million apps fraudsters use to trick users into being scammed.


In addition to mobile customers of small businesses being a target, small businesses that use mobile payments to pay suppliers or mobile banking are targets themselves. Both can leave businesses wondering how to navigate the mobile world while defending against fraud.

It’s also important to note that mobile fraud results in significantly greater fraud losses than other avenues of fraud. Fraud via mobile costs more per dollar of transaction. This means businesses spend a more when mobile fraud is committed. Although this harms all businesses, the effects are especially felt by small businesses who find it harder to bounce back.

The looming danger associated with mobile fraud means small businesses must employ fraud prevention techniques that work well on this platform and not just those that may work well for online fraud. Many strategies used to deter fraudsters employed on desktops don’t work for mobile devices.

There are specific considerations for mobile fraud prevention methods. Effective mobile strategies don’t just reduce the amount of fraud, they also need to provide a good user experience. Outdated techniques like password protection or credit card CVV verification increase user friction. These verification methods increase checkout time. This makes it more likely customers will become frustrated and abandon their mobile shopping carts.

Fraud detection, or how businesses detect fraud when it is committed, is another important focus for small businesses. Fraud detection methods that don’t catch fraudsters are pretty useless. In addition, fraud detection methods that come with high rates of false positives deter real customers who want to spend money at your store.

Fraud prevention strategies that come with high-friction and fraud detection with high false positives can be counterintuitive. They may decrease fraud, but they may also decrease sales. This can be especially detrimental for small businesses, who rely on every sale to keep their doors open.

Any mobile fraud prevention used by small businesses must be

  • Affordable
    Expensive solutions push small businesses away and may lead to the feeling that fraud is something they can’t afford to control. This is not true. Fighting fraud doesn’t have to be expensive. Every business can integrate a simple fraud prevention program, even on a mobile platform.
  • Effective
    If small businesses are investing in solutions, they want ones that work. This means fraud prevention should effectively prevent fraudsters from stealing and detection should effectively pick out the bad guys from the good.
  • Low false positive fraud detection
    Fraud detection methods should allow as many good customers through as possible without denying normal transactions. Detection methods that gather multiple data points, like behavioral biometrics, often come with a lower number of false positives because the user is graded as risky or normal based on more than one indicator.
  • Low friction fraud prevention
    Fraud prevention for mobile devices shouldn’t mean increasing user friction and driving possible customers away. This technology isn’t only available to large businesses. Even small businesses can invest in new solutions that ensure low friction.

Behavioral Biometrics for Small Businesses

One technique that is suited for the fraud prevention needs of small businesses is behavioral biometrics. Behavioral biometrics uses how users interact with mobile devices to build a behavioral profile. This can inform whether the normal user or a fraudster is trying to access an account. If it’s a fraudster, the different behavior pattern flags a red alert and they are locked out of the account. This occurs with no input from the normal user, resulting in a friction-free experience.

Behavioral biometrics can also be used for fraud detection. By building a user behavior profile, you learn what normal behavior is. Behavior out of the ordinary during a transaction can be flagged. Machine learning methods like behavioral biometrics use multiple data points to predict how risky an order is. The more risky, the more likely a transaction is to be denied. By gathering multiple data points to inform a decision, this method reduces the number of false positives.

Behavioral biometrics is a great fraud fighting method for small businesses. It is affordable, as it doesn’t require additional costly technology. The data gathered for mobile behavioral biometrics utilizes sensors already installed in devices that collect data like finger pressure, finger size, etc.

kaboompics.com_Iphone 6 plus in woman's hand

This method also doesn’t require hiring employees to specifically address fraud. Small businesses can rely on affordable services that provide the fraud expertise and manage detecting and preventing fraud. The affordability of behavioral biometrics and the lack of staff needed is huge for small businesses that often feel like fraud defense is only available to larger businesses with more resources.

Instead of fearing fraud or scaling back on avenues with costly repercussions like mobile devices, businesses can invest in this affordable and effective fraud prevention and detection.


A huge problem plaguing small businesses is a lack of education and investment in fighting fraud. While small businesses continue to ignore fraud, fraudsters continue to target small businesses. The number of small businesses targeted is expected to increase as larger businesses invest in new technologies.

This puts small businesses in an extremely vulnerable position. They are targets of ever-evolving fraudsters and left unguarded without proper defense. This is a ticking time bomb, as it only takes one large fraud attack to ruin a small business.

Small businesses should invest in simple, affordable solutions that can make a huge difference in preventing fraud. Think of these strategies as another way to keep your business healthy. By thinking about fraud prevention as an essential part of running a business, you can minimize the effect of fraud on your small business.

As a small business, it’s nice to work with someone who can have your back and provide an extra set of eyes to help you deal with all things related to fraud. Partnering with a service that is effective saves time and worry. Investing in services that include behavioral biometrics addresses the needs of small businesses and gives proper protection while ensuring the important user experience component.

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