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Payment Fraud and How to Avoid It?

World economy becomes nothing more than mockery when someone is duped of his hard earned savings in a payment fraud. Payment fraud is one of the several results of phishing, identity theft and other increasing methods of hacking. This two word problem has robbed banks of their reputation, merchants of their income and common man of his savings.

Payment fraud is when a fake or illegal transaction is completed by a cyber criminal or maybe a personal property, or funds, interest or sensitive information, card details via the Internet. Payment fraud is any fraud that involves false payments. The number of fraud cases has increased by 30% as compared to previous years, especially at e-commerce platform.

Different payment methods now days are also attracting a lot of criminals with new techniques, and thus, they are becoming more sophisticated in their use of malware in online banking logins through smart phones, tabs, and computers, using the stolen account details to make fake payments.

For example, a fraud person hacked into a merchant email account and he sent an email to a customer for completion of payment by using the merchant account. The customer then made a transfer payment to fraudster’s account by the fraudulent email instruction. Though after some time, when the customer exposed that the email instruction was a fraud till then that fraud person had already transferred the funds to other accounts.

So not only the customers, but the major banks and payment scheme operators also suffer from many fraudulent activities.

How Payment frauds take place?

  • By creating fake customer documents and bank accounts so that bogus payments can be generated
  • By catching and altering payee details
  • Through phone calls and emails
  • Texting malware to smart phones.
  • By Online auction or rerouting traffic to fraud websites
  • By hacking sensitive information from cards or hacking emails or account
  • Self-authorizing payments to oneself.
  • By doing unauthorized transactions
  • By stealing merchandise
  • Fake requests for a refund, return or bounced checks

In order to commit an identity theft, frauds generally target personal information such as names, addresses, email id, credit card or account details. For instance, to order stuff online under a fake name and pay using another person’s credit card information.

Types of Payment Frauds

  • Phishing:

Several websites or emails that involve personal or confidential information such as credit card, bank account or others are prone to phishing. So try to give information on websites which are trustworthy. However, if the information on the sites is unfamiliar then it might be a sign of an attempt at stealing source.

  • Page jacking:

Here usually, hackers reroute traffic from your e-Commerce site by taking control part of the site and send the visitors to a different website or fraudulent site where users and e-Commerce business owners will perform their online activity and fraud person misuses it.

  • Identity theft:

Identity theft occurs outside of the digital area too, though it’s a common kind of fraud online (e-Commerce) where the criminal steals personal information and uses it incorrectly. Using baits such as sample surveys or “happy go lucky” sort of links, people are made to disclose personal information to a stranger, who can use the same to create a fake identity and plunder your image and savings. Identity theft has been one of the major causes of online harassment. 

  • Merchant identity fraud:

Here, Cybercriminals set up a merchant/supplier’s account on behalf of an apparently legal business and charge stolen credit cards. After that hacker then disappear before the card holders find out the fraudulent payments and reverse the transactions.

Every individual wants a solution for such fraudulent activities prevailing in the market. Thus the question arises how to prevent or avoid such payment frauds?

Just like there are various factors that result in online payment frauds, there are several methods that can prevent it. A few simple steps that can be followed are:

  • Try to look or maintain awareness about latest fraud trends and where fraud is likely to happen.
  • Be aware of fraudulent emails that may come out from a trusted business or your friend.
  • Just partner up with a verified payment processor to make yourself safe and secure.
  • Encrypt all your transactions and emails containing private or personal information
  • Try to get rid of paper checks and invoices and move towards cloud-based accounting system which will ensure that your information is secure.
  • Always keep a clean machine and run security checks with an antivirus software which is very useful. Always update the antivirus regularly and do not avoid any patches that are recommended by the antivirus company. 
  • Use the tough password and try to change it regularly or use three step password or a normal PIN.
  • Set a policy about access to private information
  • Necessary for customers to log in to an individual account before  making a purchase
  • Do always call your common contact to confirm the authentication of any email instruction together with supplier’s name and account number.
  • Use CVV, AVS, payment gateway, IP address, billing address and more.
  • Always ask for required documents (e.g. invoices) prior settling any bill or a trade.
  • Does not access internet banking through hyperlink set in email or search engine.
  • Try to keep different passwords for different services.
  • Try not to reveal your personal and financial details over emails or text.
  • Keep your notifications on and use pop-up blocker.
  • Do not dispose of your information on various sites without knowing about them.
  • When using a shared computer, do not save any of your details on the computer and keep on financial history always incognito.
  • In case you use multiple smart devices for online transactions, keep an active password check on all these devices. Further, add an additional security feature such as email based or OTP based message authentication.

There exists a huge gap when cyber security education is compared to the growth of online retail and wallets. Payment fraud is not just limited to consumer and merchant protection, but is also a question of national security. Several countries already have strict laws in place in order to curb the menace of payment frauds.

However, it is obvious that most of the payment frauds can be avoided only by the inquisitive and smart people, who are cautious while making online payments.