The online fraud survival guide
Online fraud comes in a wide variety of forms, one more mischievous and costly than the other. As a business leader operating in the online space, you need to be aware of what dangers are out there and how to protect yourself against them.
Consumers are increasingly making digital payments. The ease and convenience of online business also bring with it an increasing risk of fraud. To make the experience of online shopping more convenient, customers are willing to share (and store) more sensitive data on the websites and apps they interact with. This very pursuit of convenience also makes customers vulnerable to attacks and increases the consequences of a hack.
In this handbook, we’re focusing on the types of online fraud that pose the greatest danger to merchants in the online space.
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- False credentials
- Identity theft
- ATO (account takeover)
- Friendly fraud
- Clean fraud
- Triangulation fraud
- SIM Swap fraud
What is online fraud?
Online fraud is a form of Card Not Present (CNP) fraud. As the name implies, this is fraud that occurs without the card being physically present. Usually, the fraudulent activity takes place over the internet or over the phone.
Globally, online fraud is on the rise. A report by TransUnion found that suspected online fraud attempts rose by 16.5% year-on-year between Q2 2020 and Q2 2021. The largest increases were identified in the gaming, travel, leisure, and gambling industries.
Fraud is a complex phenomenon, and the fraudster modus operandi will vary wildly at any given time. While it is true that at some point, a fraudulent payment transaction takes place, there are usually many unfortunate events that precede the illicit moving of funds. These events are meticulously orchestrated by fraudsters who seemingly have all the time and patience in the world.
How fraudsters go to work
Online fraud often follows a pattern that centers on theft and impersonation. There’s the initial theft of data, followed by the misuse of the data, as fraudsters impersonate a customer or a business (or even create a synthetic identity based on real data) as a means to steal data or money. In the end, the fraudster gets richer, and the consumer is left holding the bag.
Fraudsters generally get their hands on the credit card data either through phishing attacks, successful hacks of a merchant’s database, or in some cases, dishonest employees at credit card companies. They are also able to piece together a customer’s financial information by combining multiple bits of user data from various sources, such as data breaches at popular websites and apps.
Common types of online fraud
For ecommerce merchants, telecommunication companies, and financial institutions, the major types of fraud to watch out for are identity theft, friendly fraud, clean fraud, triangulation fraud, affiliate fraud, and SIM Swap fraud.
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