December 07, 2022
Online transactions are gaining popularity, which means that fraudsters are becoming more inventive by developing tactics that are difficult to track. The value of wire transfer fraud losses in the United States was 439 million dollars in 2019. Wire transfers were also mentioned in almost 75,000 fraud reports.
Furthermore, a survey of fraud inspectors around the world in August 2020 revealed that fraud risks have increased since the coronavirus pandemic started. About 24% of fraud examiners saw a significant rise in fraud risk in May 2020, and 47% of respondents also expected an increase in payment fraud risk during the next 12 months.
What is Fraud?
Any illegal or false transaction that is made by a cybercriminal is called fraud. The perpetrator takes funds, personal property, and interest from the victim in the form of:
- Fraudulent or unauthorized transactions
- Lost or stolen merchandise
- False requests for a refund, return, or bounced checks
Ecommerce businesses rely heavily on electronic transactions to bill customers for their products and services. Fraudulent activities have also increased due to the increase in electronic transactions.
How Does Fraud Happen?
Payment fraud happens when someone takes another person's payment information and uses it to make unauthorized transactions or purchases. The cardholder or owner of the compromised payment information notices that their account is being used to make purchases or transactions they did not authorize and files a dispute.
Hackers are now skilled at illegally obtaining information online. They pose as legitimate representatives and ask for sensitive information from credit cardholders. Then they use the following methods of interaction to steal personal details:
- Texting malware to smartphones
- Instant messaging
- Rerouting traffic to fraudulent websites
- Phone calls
- Online auctions
Moreover, these hackers work in groups to hack into network security systems. They look for bugs or patches that haven't been updated in a while, allowing them to access firewalls and permit them to obtain sensitive data illegally.
Business owners face a problem when this happens. They will need to resolve the dispute, pay many penalties, such as investigation fees and chargeback fees, and lose their time and resources.
Different Types of Fraud
Phishing is a social engineering technique that steals user data, such as login credentials and credit card information. It happens when an attacker pretends to be a trusted entity and convinces the victim to open a fraudulent email, instant message, or text message. This trick can lead to malware installation, freezing the system, or disclosing of sensitive information.
Customers can also falsely initiate chargebacks.
After receiving a product, or service, the customer will fraudulently initiate a chargeback. They do not only get their money back, but they also get to keep the product or service. It is prevalent and, despite its name, it is not friendly.
Pagejacking is the act of copying legitimate website content to another website to replicate the original website.
The purpose of a pagejacker is to illicitly redirect traffic from the original website to copied Web pages. They use search engines to index bogus content to allow search results ranking and display with that site.
Criminals set up merchant accounts for a business that appear legitimate and then charge stolen credit cards. The hackers disappear before cardholders realize the fraudulent transactions and reverse them. The payment facilitator is responsible for any loss or additional fees incurred due to credit card chargebacks.
Affiliate fraud is where malicious actors manipulate traffic and sign-ups to make merchants believe they get consumer attention. Many companies participate in or manage an affiliate marketing program that earns commissions through sharing content and linking.
Affiliate fraud can be as easy as refreshing a website multiple times or sending pop ups and spam emails to create a false impression of high traffic.
Clean fraud is a fraudulent transaction that appears to be legitimate. This type of transaction is becoming more problematic for eCommerce businesses. It is also less likely that the transaction will be flagged or appear on a list of fraud accounts.
Fraudsters will convince account holders to purchase from a fake website to make the fraud seem genuine. They can also intercept transactions between transaction parties. Then they can use the data they gathered to make a fraudulent purchase on a real website.
How to Reduce the Chances of Fraud
- Carefully Monitor Transactions
Verify all details that are part of a transaction, such as the shipping address, IP address, and amount. It keeps track of all transactions and decreases the chance of any important details being changed without your knowledge.
- Limit Access to Confidential Information
Limiting access to confidential information reduces the chance of information leaks. Only allow key personnel to have access to personal information.
- Encrypt Transactions and Emails
By encrypting documents before they are sent, the person who is supposed to see the document can only see and not modify it, ensuring that there are no chances of customers using it for illegal purposes.
- Be Updated on Fraud Trends
As businesses become more functional and connected online, fraudsters seek new ways to get and use private information. Therefore, to reduce fraud risks, enterprises must stay informed of the latest fraud techniques worldwide to implement security measures that will protect their business.
- Use Strong Authentication Procedures
FIDO2 is a phishing-proof authentication protocol that is highly focused on the user experience. The FIDO Alliance is a group of 300+ companies who work together to make eCommerce safer, more frictionless, and with reduced incidences of phishing. More than 4 billion devices support the FIDO2 standard, and millions of devices are added each month. A large number of enterprises increasingly realize the benefits of this protocol today.
FIDO2 is a web-centric, passwordless authentication protocol supported by major browsers. It was created in collaboration between the FIDO Alliance and W3C (World Wide Web Consortium).
Unless a company implements fraud prevention solutions like FIDO and FIDO2, it's not simple to know where the vulnerabilities occur in an organization. Using reliable fraud prevention tools like these will help prevent future frauds.
It will also increase the confidence of a company's partners, investors, and auditors. A well-demonstrated effort to reduce internal and external fraud risks like using FIDO and FIDO2 makes a business a more attractive investment, partner, and supplier.
LoginID is a leading provider of FIDO2 biometric protocols that offer strong customer authentication, eliminating the insecurity associated with traditional login methods and passwords.
With LoginID's real-time fraud prevention solutions, businesses can reduce internal fraud and elevate customer conversion rates. End-users can also have peace of mind knowing that they can log in to any LoginID-integrated platform and transact securely.