In today’s digital world, online shopping and payments have become a part of our lives. We all buy clothes, accessories, and even groceries using online means and also pay online. But, with the ease of making online payments from your comfort, there also comes a risk. This is the risk of online payment fraud.
According to a Federal Trade Commission report, only in 2022, consumers have reported a loss of around $8.8 billion due to online fraud. This figure is rising significantly with time. So, it is important to know how to detect and prevent these online frauds.
In this guide, we will discuss multiple types of online payment fraud and some effective strategies for fraud prevention in online payments. By employing these strategies, you can save yourself every kind of payment fraud. Let’s get started!
What is Online Payment Fraud?
Online payment fraud is a type of illegal activity in which people use dishonest ways to steal your money during payment processing on online transactions. Cybercriminals often attempt to exploit vulnerabilities in the payment processing on online transactions to pilfer your funds and obtain sensitive information without your knowledge.
For instance, when you make an online purchase, such as buying a dress, you typically use your credit card for payment. In these scenarios, cybercriminals may resort to impersonation, posing as legitimate entities and requesting your password or other sensitive information.
To mitigate the risks of online payment fraud, it’s crucial to prioritize secure payment processing methods and exercise caution during online transactions, ensuring that your financial information remains protected.
Types of Online Payment Frauds
These online payment frauds come in many different ways. They could be in the form of phishing, skimming, or asking for an advance fee. Here are some types of online payment fraud:
- Phishing
Phishing is the most common type of online payment fraud. In this type of fraud, people or cyber criminals pretend to be your bank, website, or a trusted government agency. Then they ask for your password or other relevant sensitive information. If you fall into their trap, they will use this information to steal your money.
- Skimming
Skimming is stealing your credit card details without letting you know. For this, thieves can use a small device on ATMs and card readers in stores. This device will capture your card details when you use it. Using this detail, criminals can withdraw your money anytime.
- Chargeback Fraud
Chargeback fraud is also known as friendly fraud. In this type of fraud, people usually make a purchase and pay for it. Later, they ask their bank for a refund or chargeback. They claim that the product is faulty, and in this way, they try to get the item for free.
- Identity Theft
Identity theft is like someone wearing a mask with your face and pretending to be you. In this case, cyber-criminals use your personal information to apply for loans or open new accounts under your name.
- Advance Fee and Wire Transfer Scams
In this online payment fraud, the cybercriminals convince you to pay upfront with the promise of a big reward. However, this big reward comes up like an empty box. Once you make the payment, the thief will disappear with your money.
How to Detect Online Payment Fraud?
For fraud prevention in online payments, one must know how to detect them. Here are some simple and easy techniques to detect online payment fraud:
Use an Address Verification Service
The first way to detect online payment fraud is to use an Address Verification Service (AVS). This tool checks whether the cardholder’s address entered during the purchase matches the file with the card. If the address does not match, it can be a sign of online fraud. This ensures that your packages are delivered to the right address.
Use 3D Secure Payer Authentication
The 3D Secure Payer Authentication is like an extra password for online transactions. It is called 3D because it includes three parties:
- The Cardholder
- The Merchant
- Bank
When you make a purchase, you will be asked to enter the password that has been set up with your bank. It will confirm that you are the actual cardholder who is trying to make a purchase. In case the password or code does not match, any thief is trying to make a purchase using your card.
Check CVV (Card Verification Values)
The CVV or Card Verification Value is usually a three or four-digit code on your credit or debit card. When you make any online purchase, you are asked to enter that code. It is to ensure that only the right and authorized person is trying to make the purchase. If the entered CVV does not match with the actual one on the card, the purchase will be declared fraudulent.
Flag Large Transactions
People usually do not make large transactions on a daily basis. So, if any big transaction or purchase appears on your card, it can be a sign of fraud. Usually, banks and companies alert people in case of large transactions. If you also receive any such alert, you should definitely take prompt action to prevent fraud.
Keep an Eye on your Account and Beware of Phishing Attempts
Another important technique for fraud prevention in online payments is to keep an eye on your account. You should monitor all small and large transactions. Sometimes, cybercriminals also make small transactions to see if the account is active. If you monitor your account and catch the small transaction, you can prevent any big transaction fraud.
How to Mitigate Online Payment Fraud Threats?
Online payment frauds are increasing every day and can cause significant money loss and stress. However, with some simple strategies, you can lessen the chances of these frauds. Here are some important strategies to mitigate online payment fraud threats:
Use Secure Payment Gateways
The first and most important way to mitigate online payment fraud threats is by using secure payment gateways. When you use secure payment gateways, your credit card details are encrypted, and no one else can access them. In this way, you can easily prevent online payment fraud.
Moreover, using Ad-blockers can serve as an additional layer of protection against online fraud. Check out the most efficient ad-blockers and add an extra layer of security to your online transactions.
Employ Two-factor Authentication
Two-factor Authentication, or 2FA, is like a double lock on your online accounts. In this case, even if someone knows your password, he cannot access your account without the second factor. This second factor can be a code, text message, or call verification. So, by using two-factor authentication, you can significantly reduce the risk of online payment fraud.
Educate Consumers
Last but not least, to mitigate online payment fraud, consumer education is really important. If you are a business, you must educate your consumers about the common online payment frauds and strategies to cope with them. This can definitely reduce the risk of fraud. You can do so using emails, blogs, and social media.
Conclusion
Now you have everything you require to stop scammers from stealing your money while making online payments. Using easy methods, you might detect and block payment fraud. These methods include 3D Secure Payer Authentication, AVS, or CVV. Furthermore, you should also monitor your transactions and use reputable payment gates for security reasons.If you are curious to learn how to stop internet payment schemes from being defrauded and build a reliable e-commerce system, check out modernretail.co.uk today. You will come across the most current developments and strategies to deal with online retail security concerns efficiently.
