What is an Online Payment Fraud?

What is Payment Fraud?

What is online payment fraud? E-commerce/online payment fraud is one of the most common fraudulent activities, which stands for any type of illegal online transaction performed by cybercriminals. A victim is usually an online user who experiences the following types of losses: loss of money, interest, sensitive information, or personal property through an online means.

With the increase in online transactions, plus unlimited access to internet technology, online customers face a plethora of risks to their personal information and a breach of security policies. Another major problem with online payment systems is the management of fraudulent entries. The high demand and user preference in e-transaction has allowed new fraudulent methods to increase aggressively. A survey conducted by CyberSource suggests that businesses in North America are expected to have a loss of 0.8% of total revenue because of fraud. In the case of India, this figure is somewhere between 4-5%. Since online payment fraud is an issue of global scale, the measures to tackle this must be proportionate.

E-payment/online payment fraud can be categorized into two categories: online and offline frauds. Theft or misuse of important credentials (personal identification number, credit card details), phishing, and spoofing attacks are all different types of online fraud. Offline fraud examples include phone solicitation or mail frauds. Compared to the growth rate of transactions every year, detection and prevention of such fraud are near to impossible, because of its sophistication and short time period with which the transactions take place between two people or more.

What are the Different Ways of Payment Fraud Detection?

Payment fraud can happen in one of the three following ways:

  1. Being robbed of the article that is supposed to be delivered at the given address after purchasing
  2. Online payment transactions that are unauthorized
  3. False demand for refund, or bounced checks

Online Fraud Detection – Types of Payment Fraud

Online Fraud Detection: online payment fraud isn’t limited to the traditional type of fraud, which is known as email fraud. Today, with the high rate of internet adoption, various methods and technologies are used, which are more evolved. Globally, almost 1 out of 3 consumers is victimized by card fraud. According to new global benchmark data from ACI Worldwide and Aite Group, 30% of consumers around the world have experienced card fraud in the last five years. The study on global fraud, with more than 6,000 consumers across 20 countries, revealed that, compared to a study in 2014 on card fraud rates, illegal activity on different payment cards (debit, credit, and prepaid) is on the global rise. There was an increase in online payment fraud in 14 out of the 17 countries between 2014 and 2016.

Some behaviors can prove risky, such as leaving a smartphone unlocked. This has a direct correlation to fraud, so much so that the landscape of risk for online payment fraud is rising, alongside the global shift in an increase of smartphone/tablet usage. With such existing loopholes in a system, with regard to payment systems or online transactions, criminals will be enticed to exploit them. However, it’s not just consumers who are at risk when it comes to online fraud detection. Indeed, recent data detects that major retailers have increasing incidents of fraudulent emails, as their businesses are at risk of email and online payment fraud. The precautions for online safety that apply to consumers can also protect various businesses. But, at the same time, it’s also important for businesses to have a security plan in place, to ensure that employees are able to protect sensitive data. Businesses should have an IT department dedicated to protecting the company’s data from illegal groups/hackers or activities, whilst taking all the necessary precautions.

Here are some common practices to protect your personal information.

  • Identity Theft: Some of the most common types of online fraud detection are identity theft, phishing, and account theft. This may include the use of credit cards, as fraudsters can easily carry out a card-not-present transaction. Identity theft isn’t something new, since it also exists outside the digital world. This is a type of fraud that typically involves a cybercriminal – one who attempts to steal the personal information of a customer/user by hacking their systems. After this, the hacker uses this information for illegal online payment transactions. Because cybercriminals have all of the customer’s personal information, this makes it easy for them to bypass any fraud detection firewalls or restrictions. However, since the e-commerce website doesn’t know the difference, and mistakes the person purchasing as the original owner of the credit card, the payment is easily made. In most of these scenarios, it’s the hacker who purchases most of the items.
  • Phishing: There are many websites and email subscriptions that prompt the user/customer to opt for newsletters and alerts. Most of the time, these subscriptions will require the user to provide some of their personal data, including their credit card information. In case the email is not from a trusted source, the user’s data will be stolen and used for carrying out illegal transactions/online payment fraud. To prevent this from happening, search engines and web tools have made it possible for the user to identify trusted sources (banks, registered businesses, etc.). This way, they can guarantee that their data will be in safe hands.
  • Advanced Wire and Fee Transfer Scams: With the vast space of the internet, there are chances that a person may come across fake sites asking for a small amount of down payment, which they promise to return after the initial payment has been made. This is a technique for hackers/scammers to trick the users into giving out their credit card information. The hackers want customers/users to complete their payment for a service or product that is false via an advanced money wire transfer – before any payment fraud detection can happen.
  • Merchant Identity Fraud: This is a type of online payment fraud that involves the cybercriminal coming up with a merchant account that is similar to that of a legal business. The criminal then places fallacious charges on credit cards, all of which are stolen. This type of fraud activity is done so quickly that the original cardholder is far from realizing the truth of what has happened.
  • Pagejacking: E-commerce/online business sites are targeted by cybercriminals who use their website to hijack their customers and direct them to an untrustworthy website source. The purpose behind this is that the unwanted website will probably contain some malicious programs that can breach the website’s security systems and acquire the users’ funds falsely.

Payment Fraud Prevention 

Payment Fraud Prevention: E-commerce websites use online payment systems, such as Paypal and Amazon Pay, which allow their customers to pay their bills/complete their payment for the commodities they’re purchasing. Moreover, the majority of the businesses have taken it as their responsibility to facilitate these online financial transactions on their websites, as a way to increase their business revenues.

This constitutes the fact that billions of dollars are transferred electronically between several accounts using this online payment system. This results in more and more criminals trying to steal some of these funds through fraudulent payment schemes, which leads to online fraud detection.

Online Fraud Prevention – How to Prevent Payment Fraud

Online Fraud Prevention: Businesses online have now become aware of such schemes and have started raising awareness about online payment fraud activities/schemes and online fraud prevention. Although it may not be possible to completely get rid of cybercriminals, there are still a few methods to curb online payment fraud:

  • Take a cue from the latest trends in online fraud for online fraud prevention
  • Try to opt for a verified payment system
  • Be sure to use antivirus software in order to run constant checks for payment fraud detection
  • Be sure to regularly change your login and token credentials
  • Keep strict policies for accessing crucial and sensitive information
  • Use encryption for emails and transactions with confidential information

Conclusion

The Financial Action Task Force (FATF) published its first report on New Payment Methods in October 2006, which initially looked into the potential money laundering and terrorist financing (ML/TF) implications of payment innovations. This provided the opportunity for the user to make payments directly through technical devices (personal computers, mobile phones, or data storage cards). It confers that one of the important goals in the online payment system is to prevent fraudulent entries and ensure better security. Achieving this objective requires different payment fraud detection measures and technological support. In recent years, there has been a huge increase in the number of online shoppers and digital transactions, leading fraudsters to devise new ways and techniques to illegally obtain money. So, most of the payment fraud detection techniques are trying to maximize the accuracy rate and minimize fraud at a minimum cost. No single tool can identify all types of fraudulent entries, but a combination of strategically designed policies for payment fraud detection, along with strong technical support and the right kind of fraud management, is the ideal support for fraud mitigation.

Payment fraud prevention and online fraud detection techniques are our safest bet to mitigate fraudulent entries in the online payment systems. There should be a focus on developing a mechanism with the combination of different techniques and strategies by which revenue loss can also be controlled. For identifying non-complying countries, FATF also has a FATF grey countries list, which is also known as ‘jurisdictions under increased monitoring’.

Read More: The Job Role of MLROs.

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Breaking Barriers: 5 Key Insights on RegTech Adoption

HKMA in a report shared comprehensive hands-on experience and insights from respondents to better understand the factors and dependencies affecting AML/CFT Regtech adoption. The regulator collaborated...

How to Address Present-day Sanctions Screening Pain Points with AI

Sanctions risk of financial institutions is evolving in line with the global social, economic and political changes. As seen in recent news, governments across the globe are increasingly relying on sa...

Tookitaki Got Selected for FinTech Program: Asia meets Tokyo

Tookitaki has been listed among 8 Fintech startups in Asia for FinTech Program: Asia meets Tokyo, an accelerator launched by the Tokyo Metropolitan Government (TMG). We have been selected for our anti...

AML Alert Management: How AI can Augment Your Compliance Efficiency

The financial sector is facing one monster of a problem at the moment. As today’s financial institutions deal with millions of daily transactions, several thousands of routine financial transactions...

Tookitaki Recognised for Innovative Use of AI & Machine Learning

Tookitaki has won the Regtech Award for AI & Machine Learning and was highly commended in the solutions category for AML/CTF Compliance, in the 3rd Regulation Asia Awards for Excellence 2020 ...

Our UOB Success Tale: Setting a New Benchmark for AI-based AML Compliance

Tookitaki achieved a rare and historic milestone as our Anti-Money Laundering Suite (AMLS) solution went live within the premises of United Overseas Bank (UOB), one of the top 3 banks in Singapore.

Tookitaki Wins 2020 WITSA Digital Innovation Award

Tookitaki has won the 2020 Digital Innovation Award from the World Information Technology and Services Alliance (WITSA) as part of the industry body’s Global ICT Excellence Awards. Nominated by...

Money Laundering via Cryptocurrencies: All You Need to Know

Technological advancements have given criminals faster and safer options to wash their ill-gotten money. There is no doubt that cryptocurrencies are very useful technology innovation that helps indivi...

CNA 938 radio interviews Tookitaki Co-founder Jeeta Badopadhyay

Tookitaki Co-founder and COO Jeeta Bandopadhyay was named among the Singapore 100 Women in Tech (SG100WIT) List in September 2020. A collaboration between the Singapore Computer Society (SCS), IMDA, S...

Need for New Customer Risk Rating Models: Not All Customers Are Created Equal

Being estimated at between US$800 billion to US$2 trillion every year, money laundering is a serious problem for the global economy. While regulators and financial institutions are working hard to pre...

Is AML Compliance Heading for a New Normal in the Age of Digital Payments?

Increased digitization has influenced various businesses and brought in a paradigm shift in the way they create business models and approach growth opportunities. Moving away from conventional transac...

Excel to AI: How Reconciliation Tools Evolve for Better

In the world of finance, reconciliation is the process of comparing two related sets of records or two accounts at the end of a specific accounting period to find out if account balances are matching ...

Lessons Not Well Learned: 2020 AML Fines Cross 2019 Total

If research is to be believed, institutions across the globe have not done enough in the anti-money laundering (AML) compliance area. Data from consultancy Duff & Phelps revealed that AML fines in...

Exploring AML Risks in COVID-Era and the Ways to Address Them

The world continues to battle the COVID-19 pandemic and the crisis it brought in is unprecedented in the history of humankind. While there are a number of pandemic-related factors contributing to the ...

AML Amid COVID-19: Watch out for These FBI-listed Fraud Schemes

There has been a rise in the number of cybercrimes and fraud schemes across the globe ever since the proliferation of the COVID-19 pandemic. Criminals, in general, are taking advantage of people’s s...

OCC Spring Risk Perspective: 5 Takeaways on Compliance Risk

Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of...

How Criminals Used COVID-19 Sales Pitch to Defraud, Launder Money

As the world is working hard to contain the spread of the COVID-19, criminals continue to take advantage of the pandemic. They are devising sophisticated methods to defraud people and launder the crim...

5 Top Myths and Facts about AI Implementation in AML Programs

We are more confirmed about the power of Artificial Intelligence (AI) to transform lives and businesses now. There are countless possible applications of AI and machine learning at present, and we see...

Typology Repository Management: Solving AML Problems Via Collective Intelligence and Continuous Learning

Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of...

Money Laundering Amid COVID-19: What Regulators Across Globe Say

As the world continues to fight against the COVID-19 pandemic, there are reports that criminals are taking advantage of the difficult situation. They are seizing the moment to proliferate their crimin...

How will Art Cease to Be a Preferred Money Laundering Vehicle?

Money laundering via high-end art and antiquities is not new yet it is difficult to detect. Art-related money laundering amounts to about US$3 billion per year, according to this blog, quoting the Uni...

Beware! Money Mules in Demand amid COVID-19. Here’s an Effective Cure

If reports are to be believed, cybercrooks are taking advantage of the COVID-19 situation. They are targeting people who were laid off or working from home due to the pandemic to work for them as mone...

How do we weather a tornado of change?

“Great works are performed not by strength but by perseverance” – Samuel Johnson All of us are in challenging times. However, we cannot afford to be lethargic to life, work, and busi...

Roundtable Rewind: Embracing Next-gen Tech & Collaboration Key to Sustainability

As a regtech player with a vision to enable sustainable compliance programs in financial institutions, Tookitaki organized a first-of-its-kind industry roundtable in Charlotte, NC, USA to discuss oppo...

Tookitaki Appoints Industry Veteran Joe Friscia as Advisor

Tookitaki Holding Pte. Ltd. appointed industry veteran Joe Friscia, former President of NICE Actimize and BAE Systems as Advisor to the Company’s Advisory Board. Joe brings over 25 years’ extensi...

Should Modern Machines Be Ethical?

There are mounting concerns across the globe about the reliability and safety of artificial intelligence (AI) based systems and its enabling technologies such as machine learning (ML). On the air are ...

Tookitaki Raises Another US$11.7 million in Series A; Closes Round at US$19.2 million

– by Abhishek Chatterjee, Founder & CEO The Tookitaki team and I are excited to announce that we have raised an additional US$11.7 million in Series A funding, taking the total investment in...

30 Years of FATF: Notable Facts About Global AML Watchdog

The Financial Action Task Force (FATF), the intergovernmental body formed in 1989 to combating money laundering, is celebrating its 30th anniversary this year. Since its inception, the global agency p...

Tookitaki Joins Aite Financial Crime Forum as Sponsor

Technological advances have fundamentally changed the operational landscape of financial institutions. However, there are also new risks emerging in forms of sophisticated financial frauds and complex...

Will Machine Learning Replace Compliance Professionals?

The impact of modern technologies such as artificial intelligence (AI) and machine learning on job security has been a widely discussed topic today. Of course, AI has advanced very quickly in the last...

6 Most Prevalent Cyber-Laundering Methods in APAC

Despite being a medium to exchange information in real-time and with scale, the Internet is being misused in several ways. Among the slew of financial crimes facilitated by the Internet, money launder...

What Made Us Earn the WEF Technology Pioneer Title

Tookitaki has bagged another global acknowledgement for its outstanding works in the regulatory compliance field. Our company was selected among hundreds of candidates as one of the World Economic Fo...

We Stay as a Team, We Win as a Team and We Flourish as a Team

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to a...

ABA Regulatory Compliance Conference: 10 Sessions You Can’t Miss

The 2019 edition of the American Bankers Association (ABA) Regulatory Compliance Conference is a few more days away. Organized by the Washington, D.C.-based trade association, the conference is touted...

Tookitaki AMLS Wins SBR Technology Excellence Award 2019

Tookitaki’s Anti-Money Laundering Suite (AMLS), an end-to-end machine learning-powered transaction monitoring and names screening solution, has bagged the inaugural Singapore Business Review Tec...

Watchdogs Grow Optimistic about AI Prospects at Banks

Proper regulation of banking operations is important as any failure in the banking system would affect the wider economy. Therefore, banking is one of the most regulated industries across the globe. F...

Pitfall of Black Box AI at Banks: Explaining Your Models to Regulators

The use cases of artificial intelligence (AI) and machine learning in front-office, middle-office and back-office activities at banks are growing slowly but steadily. The major areas of AI play includ...

AI for Regulatory Compliance at Banks: 4 Assessments Before You Okay the Solution Proposal

Banking is one of the industries where artificial intelligence and machine learning find their applications at a rapid pace. Regulatory compliance within banking is an area which has become a costly a...

We Believe in Innovation, the Key to Survival and Growth

“Innovation distinguishes between a leader and a follower.” -Steve Jobs What comes on the top of your screen when you google the meaning of the word innovation is – the introduction of somet...

Compliance Functions in Need of a Technological Overhaul. Can Machine Learning be the Game-Changer?

McKinsey in its latest compliance benchmarking survey found that compliance function at financial institutions has reached “an inflection point” and current compliance standards are in an “incho...

Tookitaki Raises US$7.5 mn Series A from Global VCs to Transform Regulatory Compliance

Tookitaki, a regulatory technology company that aims to enable financial institutions to develop sustainable compliance programs, has raised US$7.5 million in Series A round. The round was co-led by L...

From Wachovia to Danske Bank: Biggest Money Laundering Cases in Recent Times

Money laundering – the criminal activity of processing criminal proceeds to disguise their origin – is one of the gravest problems faced by the global economy, and its size is growing rapidly. It ...

A Modern Approach to Address the Reconciliation Challenges of Financial Services

Reconciliation of transactions is deemed critical for the smooth running of every financial institution. The speed and accuracy of data reconciliation can distinguish a successful institution from its...

Busting a Myth: Compliance Officer’s Job is All About Risk

Regulatory compliance has become a dreadful task for banks after regulators across the globe set stricter norms in the aftermath of the 2008 financial crisis in an effort to prevent financial crimes s...

SocGen Goes Next-Gen with Tookitaki Reconciliation Suite

Société Générale leveraged Tookitaki’s Reconciliation Suite to automate the bank’s existing break reconciliation system. Key Challenges Addressed The bank’s finance department was unable to ...

Attending ACAMS Conference in Singapore? Tookitaki Awaits You with Its Disruptive AML Solution

“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it.”- Jeff Bezos Singapore is hosting ACAMS’...

MAS’ Stress on Transaction Monitoring for Effective AML/CFT Compliance and Machine Learning is the Answer

Singapore is known for its top-notch AML/CFT regime created through up-to-date legislation, stringent policy and uncompromising supervision to safeguard against the abuse of the city state’s financi...

Mifid II and the Pressing Need for a New Reconciliation Approach

The financial services industry in the EU has been confused with the introduction of a revamped version of the Markets in Financial Instruments Directive (Mifid II). The ambitious regulatory reforms t...

Is Automated Reconciliation Next to Impossible in Today’s Complex Financial World?

The 2008 global financial crisis and fairly new regulatory requirements like Basel III asked financial institutions (FIs) to cut operating costs and adopt a lean operations structure, pushing FIs to r...

Modern Tech to Reshape US AML Compliance with Regulators’ Recent Handshake

George Bernard Shaw once said: “Those who cannot change their minds cannot change anything.” The past week has seen a significant change of mind from financial regulators in the US in their ardent...

Skills Development: We Have Talents and We Strive to Multiply Them

“Mastery lies on an infinite continuum, and as a result, we will never reach the end. We can, however, see to it that we are as far along that continuum as our circumstance allows.” ― Chris Mat...

It’s Our Fourth Founding Day; Taking a Pause to Cherish Our Simple but Awesome Journey

Today, as we step into our 4th year of foundation, I feel proud and honored to be leading Tookitaki that has been successful in creating added value to all its stakeholders. I was never a CEO and Took...

Tookitaki Expands into the US with New Office in Charlotte

SINGAPORE, Sept. 24, 2018: Tookitaki Holding Pte Ltd, a leading regulatory technology company, is pleased to announce the official opening of its North American office in Charlotte, NC, in the Unite...

We Tame Machines but We Unleash Human Spirits

We are well aware of the fact that our progress as an organization is in the hands of our employees. The more energy, time and attention we invest in them, the more yield we receive. So, we always mak...

5 Methods That Modern Money Launderers Use To Beat Detection

Society prepares the crime, the criminal commits it. DID YOU KNOW? Every year, an estimated amount in the range of US$800 billion-US$2 trillion (2-5% of global GDP) is being laundered globally Regulat...

Risk Management Conference: Positive Vibes from All Corners

The Risk Management Association’s (RMA) premier annual event, the Risk Management Conference, came to an end on 6 November, and Tookitaki had the privilege to attend the event which we believe was ...

Singapore Fintech Festival: Tookitaki to showcase advanced machine learning solutions in financial services

Singapore is assured of the Fintech world’s unwavering attention next week, as the city state, is hosting this year’s Fintech Festival during 12-16 November. Touted as the world’s largest platfo...

The RMA Clarion Call to Address Risks and the Tookitaki Way

Risk officers, doing your best today is good while preparing hard for tomorrow is extraordinary. Risk management at banks has become difficult due to operational and regulatory changes. The Risk Manag...