Types of digital payment frauds that you should know

Affordable smartphones, data packages coupled with sophisticated technology and innovation has brought banking and payments to our fingertips. From ordering consumer durable products to groceries, paying utility and credit card bills or simply moving funds between own bank accounts have reduced our dependency on cash as well as the need to be physically present at bank branch. However, with the increase in banking convenience, there has been rise in number of digital payment frauds over the years.

Frauds related to cards and payment gateway at e-commerce websites grew considerably in the initial days in addition to cloning of magstipe cards. In order to curb such type of frauds, the regulator introduced measures like two factor authentication and discouraged magstipe cards.

But as they say, digital banking frauds are like a balloon. You press it in one place and it swells in another. Fraudsters are coming out with novel means to take over the banking credentials of the unwary customers. The most common form is through ‘Phishing’ or ‘Vishing’, wherein the intended victim gets an e-mail or a phone call from fraudsters impersonating themselves as representative of bank, service provider or even the regulator i.e. the Reserve Bank of India.

Consumers are enticed or coerced to confirm their bank account, card details or internet banking credentials in order to avail tempting offers. Fraudsters try to gain customers’ confidence and make them believe that if they fail to share such details, they would lose monetary incentives or reward points, special deals, discounts etc. At times, they may also scare consumers that they may lose access to the remote banking privileges or their banking services will be withdrawn. Sometimes, links are sent through SMS, clicking on which, malwares such as Trojans gets automatically downloaded. It captures and shares information with fraudsters regarding everything that you do or store in your mobile device.

Offering to complete KYC checks of digital wallets or bank accounts is another way of victimising unaware consumers. Fraudsters may ask them to download a tool to complete the formalities which could be nothing but renamed desktop emulation software that gives them control of mobile device or computer of consumers.

Despite the education and awareness campaigns by financial institutions and the regulator, many people still fall prey to such tricks because of differences in the literacy levels of consumers and their individual attitudes or approach. Not all people would react to the same phishing message in the same way. For example, most people can spot a problem with the spelling and grammatical errors in the phishing messages, but not all. It is important to note that fraudsters deliberately send messages with these mistakes and those who fail to notice the difference between a professionally composed message and the poorly constructed one falls under potential victim categories that they can target easily.

Banks are adopting sophisticated tools to monitor transactions that flag potential fraudulent activities. There are tools available which highlight unusual transactions on real time basis based on triggers such as customers’ location, purchasing behaviour or spending pattern etc. Emerging technologies like Artificial Intelligence (AI) and Blockchain are also helpful to build an effective fraud risk management system.

However, considering that the payments industry is evolving in the country and there are many first-time users of digital payment services, there is a constant need to create awareness among consumers. Consumers should remain vigilant as digital frauds may victimise people as long as they remain vulnerable. Banks, service providers, third-party payment apps and entire payment ecosystem protect interest of customers through several multi-layered approach to derive a fine balance between safety of your transactions while providing ease of making payments.

The article is authored by Niranjan Upadhye, General Manager, Fraud Risk Management, Worldline India