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Transaction Laundering Threatens Mobile Payment Ecosystem

by on July 1, 2016

Electronic crime is one of the biggest threats finance has faced throughout the years. Money laundering continues to rise, despite preventive measures by financial institutions all over the world. Criminals are focusing their attention on the mobile ecosystem now, through transaction laundering. Big data will help to identify irregular transaction patterns.

The evolution of mobile payments is both a blessing and a curse for retailers around the world. Just last year, nearly one in five retail sales were completed through a smart device. This means retailers will need to allow for mobile payments on their website and in-store. But so far, the costs and efforts seem to pay itself back tenfold.

Unfortunately, there is also the looming threat of mobile commerce fraud to take into account. Electronic crime goes wherever the money is, and security flaws are everywhere. Right now, that will be in the mobile sector as brands and stores scramble to meet customer demand. For every positive, there is a negative, as everything needs to be balanced.

The Rise in Transaction Laundering Is Disconcerting

Transaction laundering is a very real and grave threat to mobile commerce. Criminals hijack legitimate payment processes to sell illegal goods and services. With the increase in mobile payment methods, it also becomes easier for the illicit actors to receive payments. Big data can play a major role in this process as it can help payment processors sniff out illicit deals.

In fact, payment processors should be even more concerned about transaction laundering. In the eyes of the law, they are the ones responsible for making these deals happen. Coming up with ways to differentiate between legitimate and illicit transactions is a top priority. Doing so will require a lot of big data, to say the last. Right now, it appears banks process 10% of all sales without consent or awareness by e-commerce sites.

Actively combatting transaction laundering will require fundamental changes. Vetting and monitoring online merchants and mobile apps will need more thorough monitoring at all times. Advanced cyber intelligence techniques are mandatory, including big data and machine learning. This battle will be long and challenging, but payment processors need to address transaction laundering before things get out of hand. 

Header image courtesy of Shutterstock

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JP Buntinx is a 30-year old FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he is working to achieve the same level of respect in the FinTech sector.
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