As the U.S. consumer gets more involved in the smart phone revolution, all the talk is about mobile wallets. Unlike our Asian and European counterparts, U.S. consumers have been slow to adopt mobile commerce on a per capita basis. This has become a major priority of the carriers, handset and operating system companies, as well as the traditional issuers of credit and big box retailers, to accelerate this.
There are two barriers, as I see, around this world evolving. One, is the fallout of the Great Recession, of 70 million Americans, who are living on a cash basis. They go undetected by the credit bureaus. These include undocumented workers, the marginally employed, or couch-surfing Gen M. All these segments are heavily wed to cell phones in their day to day life. In fact, many over-index in their use. Two, there are very few database companies that have structured their databases to be cell phone centric. They live in a old world where name and address was king. None of the credit bureaus have a deep penetration of phone numbers on file. I know one company who is dedicated to compiling this data; based on a 2 year experience, they offer just 50 to 60% coverage.
This opens up a big can of worms for retail. Imagine that 50% of your traffic can not be screened using traditional fraud methods? This will cause a lot of fraudulently oriented individuals to potentially breach the retail environment, and worst for the retailer, a lot of false positives being issued against worthy consumers who don’t necessarily have traditional records.
I recently met up with two patent holders who will be entering into the market in 2016. Both have different approaches to fraud detection, and it will be interesting to see how the mobile industry and retail accepts and adopts these technologies. Hopefully they will address this rough sea ahead.
