Payment fraud has become a major problem for individuals and corporations globally. This has taken place because of the increase in online payments. That’s why your company needs to safeguard against fraud. This is possible when actively following the proper procedures and safety measures.
Therefore, this article will provide all the information regarding payment fraud, how it works, and how to protect your business.
What is Payment Fraud?
Payment fraud is a problem that has continued to grow. It occurs when an individual uses stolen payment information, such as credit card or bank account numbers, to make purchases without authorization. Thus, consumers and businesses are worried about it because it may cause immense financial losses.
Identity theft and phishing are different ways of payment fraud. Identity theft occurs when someone uses another person’s name, address, or date of birth to commit crimes.
Unauthorized transactions relate directly to payment fraud. In this respect, one person obtains a payment method illegally and purchases on the owner’s behalf without their knowledge. Due to its repercussions on people’s lives, payment fraud has become a matter of concern; thus, you should always secure your records by using strong passwords and keep checking for fearsome activities occurring on your accounts. Also, never open suspicious links.
Types of Payment Fraud
Here is a list of types of payment fraud:
1. Credit Card Fraud
Credit card fraud is the unauthorized use of a credit card to make transactions or gain cash. It may entail the manufacture of fake credit cards or the use of stolen credit card information. When a credit card is taken, the fraudster can use it to make purchases offline or online or to get cash out of an ATM.
Losses from credit card fraud rose from US$3.5 billion in 2019 to US$4.2 billion in 2020. By 2024, card-not-present fraud is predicted to have increased from 57% in 2019 to 74%.
2. Debit Card Fraud
Although it involves the unauthorized use of a debit card, debit card fraud is comparable to credit card fraud. The dishonest actor might utilize a debit card that has been stolen or the card details to make purchases or get cash out of an ATM. If the cardholder’s PIN is compromised, debit card fraud may also transpire.
3. Bank Fraud
Any form of fraud involving a bank or other financial organization is referred to as bank fraud. This can involve identity theft, account takeover fraud, and fraudulent lending. Both individuals and institutions may suffer large financial losses due to bank fraud.
According to the 2022 ACFE Report to the Nations, with a median loss of US$100,000 per case, the banking and financial services sector is the second most frequently targeted industry for fraud.
4. Bank Transfer Fraud
Bank transfer fraud is transferring money to one’s account by a fraudulent actor who has gained access to another person’s bank account or bank transfer details. The fraudulent actor may use various strategies to get the victim’s information, such as phishing scams or breaking into the victim’s email or computer system.
According to the FBI’s Internet Crime Complaint Center (IC3), bank transfer fraud was the most often reported form of email account compromise (EAC) and business email compromise (BEC) scam in 2020.
5. Cheque Fraud
Check fraud is the fraudulent creation or manipulation of a check to obtain money. This can involve changing the amount on the check or forging a signature. Theft of checkbooks and access to the victim’s current account details are two ways check fraud can happen.
In the past, checks were the most easily counterfeited payment mechanism; in 2020, 66% of all payment fraud cases involved checks.
6. Mobile Payment Fraud
Mobile payment fraud is the unauthorized use of mobile payment services, such as Apple Pay or Google Wallet, to make purchases or transfer funds. It can occur if someone gains access to the victim’s mobile device or payment information or a fraudulent actor creates a fake mobile payment account using someone else’s information.
How does Payment Fraud Occur?
Along with knowing the types of fraud, let’s also understand how payment fraud occurs:
- Phishing: Phishing mainly involves stealing private data such as login credentials, credit card numbers, and sensitive information. This technique is commonly used in email and social media campaigns, where the fraudster provides a false payment website or login page, and users fall for this trap and give their personal information.
- Skimming: In skimming, the fraudster steals credit or debit card information. This gadget records the card details and PIN, which can be used to make fake cards or withdraw cash from an ATM.
- Identity theft: Identity theft happens when a dishonest person uses someone else’s personal information—like their name, address, or Social Security number—to conduct dishonest business dealings. This can involve applying for new credit cards, making unauthorized purchases, or opening credit cards.
- Chargeback fraud: Chargeback fraud is when a consumer uses a credit or debit card to make a purchase and then disputes the transaction with their bank because it was defective or unauthorized. Even when a chargeback occurs, and the cardholder makes the purchase, the firm must frequently reimburse the customer.
- Business email compromise (BEC): BEC fraud is a type of fraud that specifically targets company employees. A fake actor will send a phishing email to an employee, typically a senior executive or business partner, asking for sensitive information to be disclosed or money to be transferred to them.
- Malware: Any harmful software intended to obtain sensitive data or take over a victim’s computer or device is called malware. Scammers use malware to obtain login credentials, credit card details, and other personal data.
How do you Safeguard your Business from Payment Fraud?
Here are the methods to safeguard your business from payment fraud:
- Utilize secure payment methods: When using NFC contactless payments, EMV chip cards, encrypted web payments, and contactless payments, you are choosing safe payment options. These payment options are more advanced and secure than magnetic card or debit card payments.
- Implement strong authentication measures: Implement strong authentication measures, such as biometric, so authorized individuals can access the sensitive data.
- Regularly monitor accounts: Companies need to keep track of their accounts regularly so that they can detect any suspicious activities.
- Educate both employees and customers: Teach staff members to recognize and report unusual activity and instruct clients on recognizing phishing emails and other fraudulent schemes.
- Employ fraud detection software: There is much software for fraud detection, and companies can install such software in their systems to obtain information about suspicious activity.
- Restrict access to sensitive data: Companies should exercise caution when deciding who within the organization has access to private data, such as bank accounts or credit card details.
- Stay up to date with security measures: Businesses should stay current on security measures and software updates to ensure they utilize the best fraud prevention techniques.
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