How to Protect Mobile Wallets from Prepaid Card Fraud

In the rapidly evolving world of mobile wallets, the surge in prepaid card usage has sparked a global financial revolution. How can we effectively protect customers and combat the spectre of fraud that shadows this digital progression? What are the strategies that are reshaping the battle against prepaid card fraud within the realm of mobile wallets?

The Global Surge of Mobile Wallets and Prepaid Cards

The era of "mobile-first" has given rise to the widespread consumer adoption of mobile wallets. The statistics are staggering, with nearly 1 billion daily active mobile wallet users globally, with projections indicating additional growth, reaching 1.3 billion consumers in the coming years.

This momentum is steering over half of e-commerce transactions towards digital and mobile wallets. A report from Juniper Research forecasts that the number of global digital wallet users will exceed 5 billion by 2026. This seismic growth is mirrored in the value of digital prepaid card transactions, expected to reach $3.98 trillion by 2028.

One driving force behind this surge is the integration of prepaid cards into mobile wallets. Particularly in regions where traditional banking structures are lacking, or there is a sizeable unbanked population relying on cash, prepaid cards offer a simple and effective financial solution. The flexibility of prepaid cards, seamlessly integrated into mobile wallets, has become a lifeline for financial inclusion and e-commerce growth.

Prepaid Card Threats: Protecting Cardholders

Yet, this digital leap forward also casts a shadow in the form of fraud. Fraudsters have evolved their tactics to exploit the vulnerabilities of mobile wallets and prepaid cards. The types of fraud are diverse, including:

• Account takeover: unauthorized access to a user’s mobile or digital wallet account, allowing fraudsters to control the prepaid card
• Phishing: fraudsters trick users into revealing their account credentials through deceptive means
• Malware attacks: malicious software targets mobile devices and apps to steal prepaid card details
• QR code scams: fraudsters manipulate codes to redirect payments from digital accounts and prepaid cards to accounts controlled by the criminals      
• SIM card swapping: fraudsters take control of victims phone numbers to bypass two factor authentication and gain access to digital wallet accounts and prepaid cards
• Card cloning: duplicating prepaid card information to make unauthorized purchases or cash withdrawals
• Unauthorized reloads or transfers: fraudsters gain access to a user’s wallet account and initiate unauthorized card reloads or transfers directly to compromised prepaid accounts

As the stakes rise for issuers and cardholders, it's imperative to build a united front against these threats.

FICO's Cutting-Edge Solutions

FICO’s market-leading fraud solutions can help combat digital wallet fraud, with FICO Falcon Fraud Manager utilizing AI and machine learning to predict fraud patterns in real-time digital wallet transactions. As fraudsters become increasingly sophisticated, FICO’s self-calibrating machine learning techniques identify anomalous behaviours, adapting to the evolving fraud landscape while remaining unobtrusive during legitimate transactions.

But it doesn't stop there. FICO's holistic approach encompasses customer communication services that bolster trust and engagement for cardholders. By seamlessly integrating with FICO Falcon Fraud Manager, these services leverage fraud scores and customer behavioural data to determine the most effective means of communication. This dynamic engagement enables card issuers and digital wallet providers to interact with customers in real time, confirming legitimate transactions or alerting them to potential fraud, all in their preferred communication channel.

For example, the collaboration between FICO and Dock, a Brazil-based payment processor, has demonstrated remarkable results. Through a combination of Falcon Fraud Manager and Customer Communication Services for Fraud, they have identified fraud faster, doubled fraud detection rates, reduced false positives, and enhanced customer engagement rates.

Navigating the Future

The global growth of mobile wallet usage brings undeniable opportunities for financial inclusion and e-commerce expansion. However, this growth is accompanied by the looming spectre of digital wallet fraud. The key lies in collaborative efforts among telecommunications providers, banks, fintech companies, and innovative solutions like FICO Falcon Fraud Manager. As AI and machine learning solutions continue to evolve, these tools can be deployed to protect users' financial transactions from scams in the dynamic landscape of mobile wallets.

How FICO Can Help You Protect Digital Wallets

• Read the executive brief on mobile wallets and fraud
• Learn more about the FICO® Falcon® Fraud Manager
• Learn more about the FICO® Customer Communication Services for Fraud
• Find out more about FICO’s Partner Program