Surge in Mobile Banking Creates a Security Gap That's a 'Wild West' for Fraudsters
Think about it. Do you know anyone who writes checks anymore?
Online banking has become ubiquitous as more people turn to their smartphones to carry out daily tasks. Still, while it may be more efficient, using your phone to make financial transactions could raise security risks.
Portland, Ore.-based online fraud detection company iovation tracked online financial transactions across 1.5 billion devices in July and found that 20 percent were done through a mobile device or tablet. That's an increase over the 18 percent of online financial transactions done on a mobile device between January and July of this year, and 11 percent last year, according to a statement the company released today.
Part of the reason more customers are using mobile apps to do their banking is that financial institutions are innovating aggressively in the space, trying to appeal to customers that want to do everything on the go, says Max Anhoury, iovation's vice president of Global Sales, in a statement.
Customers are becoming increasingly comfortable with their personal histories living on their mobile devices. People are even using their smartphones to help them get pregnant these days. Really.
The problem is that security procedures aren't keeping pace with app innovation, leaving a window for fraud.
"With this rapid innovation, we found that financial institutions are unable to integrate security protocols as quickly as they would like since the 'old' security measures may not be well suited for the 'new' mobile world," says Anhoury. "This means that mobile transactions can be like the Wild West for fraudsters."
For entrepreneurs considering launching a mobile app, it's important to be hyper-vigilant about the security of your users. Throughout your development process, push out security updates to users on a regular basis. Test often for holes in your security, and if you do have a security breach, be honest about it. Transparency wins customer's favor in the end.
Related: Mobile App Basics: 3 Ways to Make User Security a Priority
Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.