When the pandemic was at its worst, and many stores had to close, online sales went through the roof. This sudden change in how people act gave fraudsters a lot of new chances to take advantage of people.
Unintentionally, technological progress has also aided the rise in payments fraud. It is more difficult for banks to detect and block fraud with one-click payments, and the dark web aids fraudsters in perpetrating larger-scale scams.
In addition, technological advancements have helped reduce instances of fraud. Companies can improve their bottom line and customer satisfaction by improving their ability to detect and prevent fraud.
Simply put, what is the definition of payment fraud?
If someone who isn’t the rightful owner of a payment instrument attempts to use it to commit fraud, this is called payment fraud.
5 Common Schemes and How to Avoid Them
1. Theft of Identity
Identity theft is a common tactic used by con artists. This scheme predates the development of the Internet and has been used by merchants since the beginning of time. Unfortunately, con artists have adapted their methods.
Nowadays, identity thieves will try to steal consumers’ information by impersonating a website, online shop, or any other virtual authority and asking people for personal data. Phishers can steal email addresses, phone numbers, and even financial details.
- How to Prevent
Companies in the e-commerce space can aid their customers by regularly highlighting official channels, websites, and payment solutions options. Warn them about phony websites that might try to steal their data.
Users should exercise caution before entering personal information such as banking information, credit card numbers, or online wallet passwords into any website. Verify once more that a website doesn’t have a trust seal or a suspicious URL that doesn’t match the site’s actual name.
2. Fraudulent Business Email
By pretending to be a higher-up in the company, fraudsters can trick employees into sending money to their accounts via business email compromise.
Invoice rerouting is a similar fraudulent practice. Through social engineering, fraudsters can change the payment information on legitimate payable accounts, usually by pretending to be a supplier and requesting payment to fulfill invoices.
- How to Prevent
Companies have responded to this rising trend by increasing frontline training, revamping control architecture, and maintaining stringent company transaction databases using a unified finance and payment app. Businesses also use emerging data and technologies like voice analytics to block incoming emails or messages from fraudulent accounts.
3. Taking Money Without Permission
When dishonest parties take control of a payment system, a situation known as payment interception or man-in-the-middle fraud occurs. Credit card fraud is shifting to other payment systems, such as e-wallets and social media.
Some people pretend to be from the company and send potential customers to a different bogus website. A fraudster could, for instance, read through the feedback left for a retailer on their website and provide a link to a fake payment page in response to customers’ questions.
- How to Prevent
It can be challenging to identify instances of payment interception. Examining a payment page in great detail before submitting a payment is one way to spot fraudulent activity in these online transactions. Look elsewhere if your chosen payment method doesn’t permit disputes or refunds.
4. Intrusion into a System Using a Password or Code
Over time, hackers have developed increasingly sophisticated methods to crack passwords and codes. Scammers and phishers use various techniques to access users’ private data and login credentials. Any website that deals with or accepts currency online is vulnerable to this danger.
- How to Prevent
Online shopping fraud can be prevented using a long password with letters, numbers, and symbols. Use a secure password manager and frequently change your passwords.
For their part, e-commerce platforms should only work with a payment processor that uses military-grade encryption and other safeguards to protect customer information.
5. Theft of Refunds
It is possible to avoid scams by integrating with services like Apple Pay, Google Pay, PayPal, or any other partner that allows refunds. However, online payment refunds have also been abused by criminals. In such instances, the customer will place an order and request a refund once completed.
- How to Prevent
Being open and transparent about your return policies and making them available on your website can help you avoid refund fraud. Because they are in a difficult position, many companies’ customer service representatives issue refunds and returns that are not by the company’s stated policy.
Before giving a refund, always check for a return receipt and evidence that the product was shipped back. High-priced items and those cumbersome to ship may also incur restocking fees.
