Payment fraud keeps the world in a constant state of alert. The numbers speak for themselves - Q3 of 2021 has seen over 56,000 payment fraud attacks globally. That is 14% more than in the previous quarter and equals to a 274% year-over-year increase.
With such disturbing statistics, it’s only natural to seek ways of minimizing the chances of cyber fraud happening to your business. Below you will find an overview of the key payment safety risks you should watch out for these days and tips on how to mitigate them.
No matter how progressive payment security methods are, they are always followed closely by evolving fraud risks. Here are the top payment fraud trends you should watch out for in 2022:
Authorized Push Payments
Already in mid-2021, approximately £355.3 million was lost to APP scams in the UK alone, being a 71% year-over-year increase. 70% of such fraudulent transactions took place online, which translates to an increasing fraud threat in eCommerce.
Be especially careful when it comes to the following communication channels often used by fraudsters:
After tricking users into sharing sensitive data, scammers target these details toward stealing funds or conducting other illegal financial activities.
Buy Now Pay Later Fraud
BNPL services enable consumers to purchase products by covering their costs over the course of time with installments. It’s a payment trend that has been gaining force throughout the pandemic, which is why it attracts scammers. After all, when a technology is still fairly new, it’s easier for fraudsters to victimize users who are not fully sure how to use it.
Cybercriminals collect users’ login credentials to conduct purchases on their behalf and exploit the BNPL account enrollment process to defraud merchants.
Deepfakes are realistic substitutions of photo, audio, and video materials created using neural networks. It is becoming more and more common for this technology to play a role in phishing incidents.
For instance, fraudsters can create an imitation of a manager’s voice and lure out money or sensitive data. As movie-like as it sounds, such incidents have occurred. In 2019, a CEO transferred $243,000 to scammers who were using a voice deepfake.
Scams like this impose significant risks to businesses and consumers alike since they are targeting and dealing directly with humans instead of technology.
QR Code Fraud
The global pandemic has boosted the trend for contactless transactions. As positive as it is to prevent infection spread, it also comes with risks of payment fraud.
In a study carried out by Visa in 2021, 60% of consumers globally admitted that they prefer to pay in a contactless way whenever possible.
One such contactless payment method is conducted by means of QR codes, square-shaped barcodes that direct shoppers to a URL when scanned. Scammers use the simplicity of the QR code transactions’ algorithm to spread malware and replace official merchants’ links with fraudulent ones.
Fraud has a multitude of negative effects on businesses, from reputational damage to financial losses. While there’s no universal solution that can provide a business with 100% from payment risks, there are some steps a merchant can take to minimize them:
1. Analyze Consumer Behavior
Knowing the behavioral patterns of your customers will let you spot suspicious activity early on. Thus, it is essential to implement the behavioral analytics technology to identify fraud attempts at checkout.
Introducing risk-management tools based on AI technology will help you track user actions, such as logins changes of devices, and prevent fraudulent transactions.
2. Combine Human and Technological Efforts
Even though there are plenty of technological solutions aimed at identifying fraud, human participation in the process is still critical. This is due to the fact that complex behavior doesn’t necessarily have to follow a pattern a system could detect.
Therefore, a rules-based system is highly recommendable for businesses to retain full control over risk decision-making yet still reap the benefits of machine learning -powered tech.
3. Invest in Tokenization
Tokenization is the most secure encryption algorithm to date. It replaces the cardholders’ details with unique, random tokens, making sensitive data unreadable to third parties.
Tokenized data cannot be deciphered by scammers, making this transaction security method one of the weightiest factors in ensuring transaction safety.
Even though financial transactions encounter a plethora of risks on a daily basis, there’s no doubt that digital payments are the future of commerce. Thus, it’s inevitable that there still will be security breaches and scam incidents years from now.
However, what you can do is stay continuously up-to-date with the emerging payment fraud trends and take the right steps to minimize their risks for your business and customers.