Watch Your Mobile Wallet

Fraudulent smartphone payments are becoming a pricey problem

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By Olga Kharif

February 13, 2015 at 12:30 AM UTC

This article is for subscribers only.

This article is part of the February 16, 2015 issue of businessweek.

After years of false starts, mobile payments are beginning to live up to the hype. They accounted for $52 billion worth of U.S. transactions last year, up from $32 billion in 2013, and are expected to rise to $67 billion this year, according to analyst Forrester Research. From Uber to Starbucks, startups and old-school retailers alike see the benefits of letting customers leave their credit cards in their wallets or even at home.

Where the money goes, criminals follow. Mobile devices now make up a disproportionate share of the $6 billion that fraud costs merchants and card issuers in the U.S. each year. While mobile payments account for 14 percent of transactions among merchants who accept them, they make up 21 percent of fraud cases, according to a survey of about 1,100 companies published on Jan. 26 by LexisNexis Risk Solutions. “We certainly see a surge in mobile payment attacks,” says Tomer Barel, chief risk officer at PayPal, who says his company deals with more cases of fraud on mobile devices than on PCs. “There are many more avenues for fraudsters to try.”