What Is Online Payments Fraud?

In this write-up, we will tell you the ways to stop payment fraud, besides providing insights into the common types of such fraud.

To safeguard yourself from payment fraud, consider the following steps:

1. Use Strong, Unique Passwords: Create complex passwords for your online accounts and avoid using the same password across multiple sites. Consider using a password manager to keep track of them.
2. Enable Two-Factor Authentication (2FA): Add an extra layer of security by enabling 2FA on accounts that support it. This typically involves receiving a code on your mobile device or email in addition to entering your password.
3. Monitor Your Accounts Regularly: Frequently check your bank and credit card statements for any unauthorized transactions. Report any suspicious activity immediately.
4. Be Cautious with Emails and Links: Avoid clicking on links or downloading attachments from unknown or suspicious emails. Fraudsters often use phishing scams to steal your personal information.
5. Use Secure Payment Methods: When shopping online, use secure payment methods such as credit cards, which offer better fraud protection compared to debit cards. Consider using digital wallets like PayPal, Apple Pay, or Google Wallet for an additional layer of security.
6. Verify Website Security: Ensure the website you are transacting on is secure. Look for “https” in the URL and a padlock icon in the address bar before entering any payment information.
7. Avoid Public Wi-Fi for Transactions: Do not perform financial transactions over public Wi-Fi networks, as they can be less secure. Use a virtual private network (VPN) if you need to access sensitive information on public networks.
8. Update Software and Devices: Keep your operating system, browser, and antivirus software up to date to protect against the latest threats and vulnerabilities.
9. Educate Yourself: Stay informed about common fraud schemes and how to recognize them. Awareness is a key defense against fraud.
10. Set Up Alerts: Many banks and credit card companies offer alerts for transactions. Set these up to receive notifications for any charges, especially those over a certain amount or from international locations.
11. Use Multi-Factor Authentication (MFA): For added security, use MFA whenever possible. This requires more than one method of verification to access your accounts.
12. Shred Sensitive Documents: Physically destroy any documents containing personal or financial information before disposing of them to prevent dumpster diving fraud.

By following these precautions, you can significantly reduce the risk of becoming a victim of payment fraud.

Types of payment frauds

Payment frauds come in various forms, targeting both consumers and businesses. Here are some common types:

1. Credit Card Fraud:
   • Card-not-present (CNP) fraud: Fraudulent transactions conducted without the physical card, usually online or over the phone.
   • Card-present fraud: Physical theft or cloning of credit cards to make unauthorized purchases.
2. Debit Card Fraud:
   • Skimming: Using devices to capture card information from ATMs or point-of-sale terminals.
   • PIN Fraud: Obtaining and using someone’s PIN along with their debit card to withdraw cash or make purchases.
3. Phishing:
   • Email Phishing: Fraudulent emails that appear to be from legitimate sources, asking for sensitive information.
   • Spear Phishing: Targeted phishing attacks aimed at specific individuals or organizations.
4. Identity Theft:
   • Account Takeover: Fraudsters gain access to an existing account and conduct unauthorized transactions.
   • New Account Fraud: Using stolen personal information to open new accounts in the victim’s name.
5. Friendly Fraud:
   • Chargeback Fraud: Legitimate customers dispute a charge with their bank, falsely claiming it was unauthorized to receive a refund while keeping the goods or services.
6. Merchant Fraud:
   • Fake Online Stores: Fraudulent websites that collect payments for goods or services that are never delivered.
   • Fraudulent Merchants: Businesses that charge for goods or services but never fulfill the order.
7. Wire Transfer Fraud:
   • Business Email Compromise (BEC): Fraudsters compromise business email accounts to trick employees into wiring funds to fraudulent accounts.
   • Romance Scams: Scammers form relationships with victims online and convince them to wire money under false pretenses.
8. Check Fraud:
   • Forgery: Altering or signing someone else’s check without authorization.
   • Counterfeit Checks: Creating fake checks to withdraw funds from a victim’s account.
9. Synthetic Identity Fraud:
   • Creation of Fake Identities: Combining real and fake information to create new, fraudulent identities used to open accounts and commit fraud.
10. Account Takeover Fraud:
    • Credential Stuffing: Using stolen login credentials to gain unauthorized access to user accounts.
    • SIM Swapping: Fraudsters trick mobile carriers into transferring a victim’s phone number to a new SIM card, allowing them to intercept two-factor authentication codes.
11. Online Payment Fraud:
    • Digital Wallet Fraud: Unauthorized use of digital wallets like PayPal, Apple Pay, or Google Wallet to make purchases.
    • Cryptocurrency Fraud: Scams involving the theft or manipulation of digital currencies.
12. Loan and Mortgage Fraud:
    • Application Fraud: Providing false information to obtain loans or mortgages.
    • Foreclosure Scams: Fraudsters offer false promises to help homeowners avoid foreclosure in exchange for fees.
13. Ransomware Attacks:
    • Demand for Payment: Cybercriminals encrypt data and demand a ransom payment for the decryption key.
14. Invoice Fraud:
    • Fake Invoices: Sending fake invoices to businesses in the hope that they will be paid without verification.

By understanding these types of payment fraud, individuals and businesses can take proactive measures to protect themselves against potential threats.