Rick Sunzeri
The exponential growth in digital commerce has made it easier and more convenient than ever for consumers to engage with brands. One way they’re doing this is through mobile applications. Mobile shopping is no longer limited to Gen Z — adoption among Gen X and boomers is growing fast. According to our Consumer Behavior Analysis Report, 23% of consumers aged 55+ now shop via mobile apps, making mobile commerce a prime target for fraudsters.
However, the explosion in mobile apps has been accompanied by increased fraud, a sky-high cart abandonment rate, and above-average false decline rates. Additionally, in-app purchase options or microtransactions (commonly seen in gaming apps) offer a wealth of opportunity for fraudsters to create fake accounts and scam valid users. With mobile fraud attempts up 71% in 2024, merchants need to rethink their fraud prevention strategies to protect both customer experience and their bottom line.
How can e-commerce merchants and gaming companies reduce losses related to chargebacks, unfinished purchases and customer dissatisfaction? First, they need to understand how digital commerce and fraudulent trends on these platforms are much different and more complex. They could also benefit from knowing how to implement fraud protection strategies that won’t turn away customers.
Here is what you need to know about mobile applications and microtransactions.
Mobile Applications and Fraud
Back when consumers could only shop on their desktops, the only interface to worry about was a merchant’s web page. Fraud prevention has never been easy, but at least the variables were a bit more limited and somewhat predictable.
In the mobile environment, consumers may still interface with a website using a PWA, or progressive web application. But more often than not, shoppers are connecting through proprietary mobile applications that aren’t necessarily as secure. Fraudsters can wreak havoc by leveraging the trust that generally comes from downloading a mobile application.
Fraudsters now exploit mobile-specific behaviors such as background app permissions, geolocation spoofing and push notification hijacking — all of which evade traditional web fraud systems. This makes mobile application fraud prevention a distinct and increasingly urgent priority.
Types of mobile application fraud
Aside from traditional payment fraud, there are other types of mobile application fraud:
- Click Injection: Limited to Android systems, this happens when a fraudster injects a Trojan virus in one mobile application and it activates in another, giving them unfettered access to customer information.
- In-App Purchase Fraud: This type of fraud is rising rapidly. In-app purchase fraud losses are projected to exceed $10 billion globally in 2025, fueled by stolen payment data and identity spoofing.
- Device Fraud: This happens as a result of fraudsters using outdated mobile devices to download mobile applications and click enough ads or reviews to make the app seem safe. Consumers then download the app and become victims of fraudulent activities.
- Mobile Payment App Fraud: This happens when a fraudster poses as a company doing some sort of special sweepstakes. Consumers buy chances through non-traceable accounts and end up losing their money.
How to Prevent Mobile Application Fraud
Preventing mobile application fraud is often a team effort, with consumers needing to jump through an extra hoop (or two). The key is to make the mobile app purchasing process as easy as possible while still preventing chargebacks or false declines. Here are some tools you can use.
Multifactor authentication
First and foremost, require consumers to confirm their identity using multifactor authentication. Given how careless people can be when creating passwords, this is especially important. Identity verification is the source of one of the most common types of fraud. By making purchases contingent on re-entering codes sent via email or SMS, you can stop many fraudsters in their tracks. For mobile transactions, multifactor authentication has become essential.
AVS and CVV matching
Another tactic to prevent mobile application fraud is to require AVS and CVV matching.
Keep in mind that this cannot be the only tactic used, or you run the risk of generating false declines. Why? Because the likelihood that consumers will mistakenly type the wrong numbers or letters when using their mobile devices is high.
However, when this tactic is used in combination with authentication and other measures, and when users are given an opportunity to retype correctly, merchants and their fraud protection partners can more easily sort out the valid transactions from the fraudulent ones.
AI and advanced technology
Today’s fraud prevention and detection providers have a wealth of tools to help merchants identify and evaluate potential fraudulent transactions. Rules-based, AI-driven fraud detection logic can examine geolocation, past user behavior, unique device identification numbers, transaction origin, and other analytics to distinguish between valid and fraudulent transactions.
Today’s AI-powered fraud detection systems operate in real time, using data like device fingerprinting, purchase velocity and geolocation mismatches. Faster decision speed allows these systems to approve or flag transactions instantly — minimizing false declines while effectively blocking fraud.
Another fairly new and related type of fraud that has emerged in the mobile environment involves microtransactions, usually conducted on gaming apps.
Microtransactions and Fraud
Microtransactions involve consumers paying real currency for items or upgrades within any type of mobile application. These in-app purchases have proven to be very profitable for app developers. Whether users are purchasing virtual goods, downloading songs or upgrading a character’s weapons in an online game, microtransactions generate a massive amount of income. In 2024, global microtransaction revenue surpassed $76 billion, making these in-app purchases one of the most lucrative and fraud-prone areas of mobile commerce.
Types of microtransaction fraud
Nearly 1.2 billion people play games online around the world, with that number expected to reach 1.5 billion by 2029. This makes microtransaction fraud in gaming apps a huge payout opportunity for fraudsters. Gaming fraud saw an average year-over-year increase of 64% between 2022 and 2024. AI-powered deepfake schemes grew by 10 times between 2022 and 2023.
Fraudsters scam players in several ways:
iOS Payment System Attacks: A January 2021 study published in the Neurocomputing journal explains that “iOS Apps have suffered the attack of fraudulent purchase. Attackers leverage the vulnerabilities in iOS payment system to purchase virtual goods at zero or low cost. More seriously, unscrupulous attackers solicit customers publicly and provide purchasing services, which has caused huge financial loss to business entities.”
Fake Bot Accounts: Fraudsters use bots to create fake accounts. They then apply machine logic to perform well in online games, racking up power and weapons. Those characters are then sold to gamers for large sums and big profits for the fraudsters.
Sweatshop Accounts: If you’ve seen the movie “Ready Player One,” you are likely familiar with “sixers,” the human workers who were forced to play video games to win challenges. This fraud tactic is similar. Fraudsters create virtual sweatshops with poorly paid human gamers. They are required to play until they win challenges and amass power and weapons on their accounts … which are then sold to other gamers for high profits.
Fake accounts driven by bots now account for a growing share of fraud-related chargebacks, particularly in gaming environments. According to industry analysts, nearly 20% of gaming app chargebacks stem from microtransaction fraud.
How to Prevent Microtransaction Fraud
Gaming platforms struggle to fight fraud without compromising user experience because extensive authentication steps can be off-putting for gamers with little to no patience for perceived bureaucracy. If gaming companies create too many hoops to jump through, they risk losing revenue and trust in the game itself.
For this reason, gaming companies will want to apply a sophisticated combination of automated fraud protection and manual review, so cutting-edge fraud technology can flag suspect accounts, passing them along to experienced manual reviewers for the expert analysis and detective work that only humans can do. (That’s how we do it at ClearSale, and it’s why many of the world’s leading tech companies trust us to protect their e-commerce transactions.)
This balanced approach — pairing machine learning with expert manual review — helps reduce chargebacks, false positives and lost revenue. It also protects your reputation, especially in app store environments where negative reviews from fraud victims can rapidly erode trust.
Implementing these tactics minimizes the impact on real users, and the risk of fraud decreases considerably.
Keeping apps and microtransactions fraud-free
Merchants must be proactive in transactional security, offering customers a multilayered approach that — at a minimum — improves payment security, offers customer identity verification procedures and stops mobile overlay malware apps.
In addition to these measures, merchants and gaming companies can take additional steps to prevent opportunities for fraudsters.
Bring data policies and procedures up to date
Compliance, customer privacy and data security requirements need to change with employees working remotely. Your IT department likely no longer has a full read on the applications being accessed on company devices, which could be putting your systems and your applications at risk for hackers and fraudster intervention. Make sure to review all of your policies that impact company networks and technology to promote the safest environment for your employees and your customers.
Communicate with customers
Let customers know that you are implementing new tactics to prevent and fight fraud to protect them as much as your organization. This will make it easier to roll out a new security measure that requires a few extra steps. Your customers are more likely to comply and think highly of your company if they know in advance that you have their best interests in mind.
According to our 2024 analysis, 72% of app users are more likely to tolerate fraud prevention steps if they know they’re being implemented to protect their accounts.
Update/implement an omnichannel fraud strategy
Your fraud prevention and protection strategy should be a singular wheel with many spokes, which will allow all of your organization’s sales channels to benefit from learnings and trends. You won’t be looking for the same fraudulent practices in every channel or using the same tactics — but your goal of preventing fraud is consistent throughout, and your strategy should reflect that.
Partner With a Fraud Prevention and Protection Provider
Mobile application and microtransaction fraud are just the tip of the iceberg as digital commerce matures. Partnering with a solution provider that has industry knowledge and a global view of fraud trends is one of the best ways to prevent fraud.
ClearSale has helped companies all over the world — including those with mobile applications and microtransactions — to prevent fraud and implement protection strategies. We stay up to date on all of the factors that impact fraud trends and how consumers feel about them.
Chargebacks from mobile and in-app fraud can cripple a business if left unchecked. Want to better understand the causes, costs and prevention strategies? Download our comprehensive guide to chargebacks — your roadmap to protecting your revenue and improving customer trust.
