What Is a Payment
Fraud Scam?

When selecting an online payment method for your company, it’s critical to understand the different types of payment fraud scams and how to avoid them. Here are five of the most common trends and best practices for preventing fraudsters who employ these methods.

Payment Interception

When cybercriminals take control of a payment process, this is referred to as “man in the middle fraud.” Fraud is shifting away from credit cards and toward electronic wallets and social media transactions. Furthermore, fraudsters are intercepting transactions in the middle of the sales process now that payments can be made through Facebook Messenger.

Some pretend to be a company representative and send hot leads to a bogus website. For example, a fraudster might skim through an online store’s comment sections and respond to inquiring customers with a link to an unauthorized payment page, thus, leading to a payment fraud.

How To Avoid It

Payment interception can be challenging to detect. Nevertheless, education and awareness are the key. This type of fraud detection in online payments necessitates a thorough examination of a payment page before making any payments. In addition, any payment method that does not allow for disputes or refunds should be avoided. Finally, a legitimate payment gateway will often allow money-backs to ensure that customers are on legitimate sites.

Business Email Compromise

When scammers carry out a business email compromise, they use a fake business email to persuade a company’s staff to make a transfer to the fraudulent person’s account. Companies have reportedly lost millions of dollars as a result of business email compromises. 

It involves phishing emails, invoice redirection, malicious links, and many more. Fraudsters use social engineering to change the payment information on legitimate accounts, impersonating a supplier and providing the scammer’s bank details rather than the original suppliers.

One example is if a scammer poses as a raw materials supplier and emails a billing statement containing the fraudster’s bank account information and requests immediate bill payment. We are all aware of a similar payment fraud scam that succeeded in duping Google and Facebook into paying over a hundred million dollars in fraudulent bills in 2013-15.

How To Avoid It

Companies have combated this growing trend by increasing frontline training, re-architecting controls, and maintaining strict databases of company transactions by utilizing a single centralized finance and payment app. Companies are also implementing new data and technologies, such as voice analytics, to automatically block incoming emails or messages from fraudulent accounts.

Identity Theft

Identity theft is one of the most common strategies used by fraudsters, as the global transaction value of digital payments is expected to reach $5.2 trillion by 2020. This online payment fraud is as old as e-commerce itself, and it was used long before the Internet was invented. However, the way scammers commit these crimes has evolved.

Nowadays, identity thieves will impersonate a website, an online shop, or any other virtual authority and ask people for personal information to steal their information. Phishers have been known to steal people’s names, emails, phone numbers, and even credit card numbers.

How To Avoid It

Customers can be helped by e-commerce companies reminding them of official channels, websites, and payment platforms regularly. Inform them about any fake websites that may attempt to steal their personal information. Consumers should also double-check websites before entering sensitive information such as bank account numbers, credit card numbers, or online wallet passwords. Check for a trust seal or any suspicious URLs that aren’t the same as the original site.

Password Or Code Hacking

Hacking passwords and codes have become more sophisticated over time. Scammers and phishers use a variety of tactics to obtain their personal information and credentials. Thus, the websites that use third-party online platforms to handle, distribute, or accept users’ payments become vulnerable to this threat.

Cybercriminals and fraudsters prefer to target unknowing and young users because 69 percent of Gen-Zers use mobile banking apps daily or weekly. That does not, however, imply that everyone else is safe. To avoid account takeover, everyone should be wary of password or code hacking.

How To Avoid It

Using a secure password, which contains a long string of characters, numbers, and symbols, is one of the best e-commerce fraud prevention practices for avoiding password or code hacking. Using a secure and robust password-storing app like 1Password or LastPass is always recommended to mix your passwords. E-commerce websites must also partner with a payment processor that adheres to the highest levels of data security, thus doing its best to prevent payment fraud scams.

Website Takeovers

Some fraudsters will attempt to completely take control of an e-commerce store by hacking into it via a malicious plugin or app. For example, hackers have used a fake or outdated plugin to take over WooCommerce accounts and Shopify stores to access company credentials and information.

In these cases, fraudsters may alter payment credentials, bank details, and credit card information to redirect all online payments to a fraudulent account rather than the official accounts of the e-commerce store.

How To Avoid It

If you’re a store owner, always use an up-to-date security plugin to protect your account from takeovers. To avoid hacking, payment fraud scams, and store takeovers, regularly audit your apps and plugins and change access information regularly.