E-commerce has completely reshaped the ways people conduct business. The rise of online payment gateways has a slew of advantages. However, there are some risks associated with digital transactions, in addition to the benefits.
Payment fraud scams are one of the most common threats today. Did you know that people are more afraid of identity theft than home break-ins? Let’s learn about these facts in this article.
Payment Fraud Scam: An Overview
At its most basic level, a payment fraud scam entails stealing someone’s physical credit or debit card and using it to make purchases. That type of payment fraud, on the other hand, is becoming increasingly rare. In fact, since the introduction of the Europay, Mastercard, and Visa (EMV) chips, card-present fraud at the point of sale has decreased significantly.
In contrast, card-not-present (CNP) fraud has increased dramatically, which is where cybercrime and payment fraud scams collide.
Cybercrimes And Payment Fraud Scams Overlap
Many types of cybercrime exist, and many of them involve payment fraud scams. The internet has changed the way criminals target data and information. While some cybercriminals concentrate on hacking large information files to sell online, others focus on a single victim or a single card. To avoid payment fraud, you’ll need a fraud detection and prevention strategy that focuses on cybercrime threats.
Consumers are intuitively aware of this risk, as evidenced by their reaction to crime fears. For example, in the survey conducted by Inc., the respondents said they were more afraid of identity theft than having their home broken into — 47 percent said identity theft was their greatest fear.
These anxieties are grounded in reality. No wonder, payment fraud scam is the most common form of identity theft, according to the Federal Trade Commission (FTC). Over 133,000 identity theft cases involving credit cards are reported each year, and credit cards are used in nearly all (92 percent) fraudulent transactions.
A Little Dive into Stats
According to Merchant Savvy, global losses from payment fraud scams reached $32.39 billion in 2020, more than three reported in 2011. As time passes, online fraudsters and people with malicious intent try to take advantage of people unaware of their rights. Fraud accounts for a tiny percentage of the market’s overall cut; however, with the rate of fraud on the rise, abandoning online payment isn’t the answer.
The answer is fraud protection backed up by cyber-awareness.
Types Of Payment Fraud Scams
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.
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 scam.
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 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 payment fraud scam 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.
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.
What The Future Brings
Despite the reports of fraud, phishing, email compromise, and hacking, it’s difficult to deny that digital payments are the way of the future. Because fraudsters will always be present in online and offline transactions, abandoning virtual transactions is not the best solution. The overall solution is to be aware of today’s best and most authentic payment gateways and use the one you’re most secure with.
The key, however, is to become knowledgeable about the future of online payments and begin implementing solutions that offer knowledge and awareness in addition to data security, contingencies, and dispute resolution options.
Education is the only corrective measure that can help tackle the cyberthreats and growing risks. Right-Hand Cybersecurity offers real-life scenario training and education for your employees so they can proactively identify the payment fraud scam trends and keep themselves from falling into the trap of business email compromise, identity theft, and more. Learn more about Right-Hand training and solutions by scheduling a demo today!