Protecting Against Authorized Push Payment (APP) Fraud

As online transactions continue to surge across industries, concerns over authorized push payment (APP) fraud are growing among businesses worldwide. During the first half of 2022, APP fraud constituted a staggering 75% of all digital banking fraud. This type of fraud poses serious risks to both businesses and their customers, leading to financial losses, reputational damage, and erosion of trust.

To counter the evolving tactics of fraudsters, businesses are actively seeking strategies to mitigate APP fraud risks and ensure the security of their customers’ financial information. This not only involves the implementation of robust security measures but also extends to educating customers about how to avoid falling victim to scams.

In this article, we will delve into the concept of APP fraud, explore various forms it can take, and provide insights into effective strategies that businesses and customers can employ to thwart fraudulent activities.

What is APP Fraud?

APP fraud involves scams in which criminals manipulate individuals or businesses into transferring funds to fraudulent accounts. Fraudsters employ diverse techniques to gain victims’ trust, often by masquerading as legitimate entities or individuals. 

Unlike other types of fraud, APP fraud entails victims willingly authorizing fund transfers, frequently through online banking or phone conversations. This makes recovery challenging and can result in substantial financial losses for victims.

As APP fraud continues to rise, financial institutions are implementing countermeasures. However, businesses and individuals must remain vigilant and adopt precautionary measures to safeguard themselves against these scams.

Examples of APP Fraud

APP fraud manifests in various ways, with fraudulent actors utilizing an array of tactics:

  1. Impersonation Scams

Fraudsters pose as legitimate entities and request victims to transfer money to fake accounts. For instance, they may impersonate a bank employee and claim there’s an issue with the victim’s account, demanding a payment for resolution.

  1. Invoice Fraud

Fraudulent actors send fabricated invoices to companies or individuals, requesting payment for nonexistent goods or services. Companies may receive invoices for services they never ordered, leading to payments to fraudulent accounts.

  1. Investment Scams

Fraudsters promise high investment returns, persuading victims to transfer money to fictitious accounts. Examples include Ponzi schemes that promise lucrative returns on cryptocurrency investments.

  1. Romance Scams

Fraudsters build relationships on online dating platforms and request funds to be transferred to fraudulent accounts. The notorious Nigerian prince scam is an example, where fraudsters impersonate wealthy individuals and request money for various reasons.

  1. CEO Fraud

By posing as CEOs or high-ranking executives, fraudsters coerce victims to transfer funds to fake accounts. For instance, a scammer might impersonate a CEO and request an urgent payment to a supposed supplier.

  1. Tech Support Scams

Fraudsters masquerade as tech support personnel, demanding payment to resolve fictitious computer issues. Victims receive pop-up messages prompting them to make payments to remove nonexistent viruses.

Protecting Customers Against APP Fraud

Businesses bear the responsibility of implementing effective security measures to safeguard customers against APP fraud. This involves educating customers about fraud risks, verifying payment requests, utilizing secure payment methods, monitoring accounts, implementing fraud prevention measures, and promptly reporting incidents to authorities.

Customers also play a pivotal role in protecting themselves against APP fraud:

  • Verify Requests: Customers should verify payment requests, especially those from unfamiliar sources. Authenticity should be confirmed before authorizing any transfer.
  • Use Secure Payment Methods: Secure payment methods requiring two-factor authentication, such as card payments or bank transfers, should be favored. Avoid cash or insecure money transfer services.
  • Beware of Phishing Scams: Customers should exercise caution regarding phishing scams, refraining from clicking links or downloading attachments in suspicious emails or texts.
  • Protect Personal Information: Strong passwords, two-factor authentication, and prudent sharing of personal and financial data are essential safeguards.
  • Keep Software Updated: Regular updates to software and devices help guard against malware and cyber threats.

Fraud Detection and Prevention Tools

Advanced tools like Stripe Radar and secure payment hardware, such as Stripe Terminal, empower businesses to prevent APP fraud by offering:

  • Real-time Transaction Monitoring: Stripe Radar monitors transactions in real-time to detect anomalies and high-risk activities, enabling swift intervention.
  • Behavioral Analytics: Behavioral patterns are analyzed to identify unusual activities and potential fraudulent actors.
  • Two-factor Authentication: Secure payment hardware ensures dual authentication before transactions are authorized.
  • Data Encryption: Payment hardware and software use encryption to protect sensitive customer information.
  • AI-based Fraud Detection: Machine learning and AI algorithms detect patterns and anomalies to identify potential fraud.

By fostering collaboration between businesses and customers and promoting awareness of emerging threats, APP fraud can be effectively curbed. As both parties unite to combat fraud, they enhance security measures and reduce vulnerability.


Five Key Fraud Management and Assessment Strategies

In today’s digital landscape, businesses with an online presence often encounter fraud or potential fraud. As cybercriminals employ advanced techniques like ‘synthetic identities,’ organizations seek comprehensive approaches to fraud and risk management. To effectively combat fraud, businesses are adopting holistic fraud risk management strategies.

Fraud risk management entails evaluating fraud risks within an organization and designing an anti-fraud program to preempt fraudulent activities. This involves identifying inherent and potential fraud risks and implementing measures to detect and prevent both internal and external fraud.

Statistics indicate that companies worldwide lose an average of 5% of their gross revenue to fraudulent activities. Given this substantial impact, businesses must proactively address fraud risk to prevent its escalation within their operations.

Fraud risk management also carries legal implications, as non-compliance can result in severe penalties for both organizations and employees. The “Yates Memo” of 2015 spotlighted corporate wrongdoing and held individuals accountable for knowing of misconduct within their organization.

Key Factors in Fraud Risk Assessment

Here are the five key principles of an effective fraud risk management strategy:

1. Fraud Risk Assessment

Understanding organizational vulnerabilities is the first step in fraud prevention. A comprehensive risk assessment helps analyze the specific risks that a company faces due to its complexity, scale, products, and market exposure. It examines various risk types, their likelihood, and associated costs.

The assessment encompasses internal and external factors. Employees’ interactions with company resources, senior management communication, and external threats should be scrutinized. 

Defining a risk-tolerance limit quantifies risks and guides the development of a strategy that prioritizes risks exceeding the limit.

2. Fraud Risk Governance

Embedding fraud management into the corporate culture is essential. Stakeholders must embrace new procedures and comprehend the severity of fraud risks. Effective Governance includes:

  • Clear strategy communication for upper management and a fraud risk manager
  • Delegated roles and responsibilities
  • Whistleblower procedures
  • Internal audit measures
  • Investigation process description and corrective actions
  • Fraud awareness tools and techniques

Appointing a designated leader responsible for the entire fraud risk management program ensures cohesive communication, training, and adjustments.

3. Fraud Risk Prevention

A proactive approach involves deploying fraud detection tools at the onboarding stage to verify identity. This strategy applies to customers, employees, and vendors, preventing fraudulent individuals from embedding themselves within the organization.

The primary goal is to stop fraud before it occurs. Frequent risk assessments and internal controls are crucial. Over time, the organization may modify its prevention program, potentially avoiding certain activities or transferring risk to other parties.

4. Fraud Risk Detection

Controls and reporting mechanisms employed for prevention can also aid detection. Controls, implemented across various organizational layers, alert employees to potential fraud. Clear understanding and timely assessment of controls are imperative.

Reports play a critical role in detecting fraud by identifying variances and suspicious behavior. These reports should contain essential details, including timestamps. A streamlined process for flagging fraud ensures prompt action while safeguarding sensitive information.

5. Monitoring and Reporting

Fraud risk management is a continuous process that necessitates monitoring and reporting on the first four principles. Regular assessment evaluates successes, identifies blind spots, and highlights areas for improvement.

Transparency is vital in communicating outcomes to stakeholders. Regular reviews of legal requirements ensure compliance.


In summary, clarity is the common thread running through these five principles. A thorough risk assessment establishes the foundation, and clear governance ensures alignment across the organization.

Collaboration and culture underpin fraud prevention, while effective detection relies on transparent controls and reporting. Consistent monitoring and reporting sustain a robust fraud management system.

A well-integrated fraud risk management strategy shields organizations from financial losses, fraudulent activities, and legal repercussions.


What is fraud management, and why is it important?

Fraud management refers to the set of processes, tools, and strategies used by organizations to detect, prevent, and mitigate fraudulent activities. It’s important because fraud can lead to financial losses, damage to reputation, and legal consequences for businesses and individuals.

What are the primary goals of fraud management?

The main goals include identifying fraudulent activities, preventing fraud from occurring, reducing fraud-related losses, and maintaining compliance with legal and regulatory standards.

What are fraud assessment strategies, and how do they differ from fraud management?

Fraud assessment strategies involve evaluating the potential risks and vulnerabilities within an organization’s operations that could lead to fraud. This is a proactive step to identify areas of weakness and implement preventive measures. Fraud management, on the other hand, deals with ongoing activities to detect and respond to actual instances of fraud.

What are some common methods used for fraud assessment?

Common methods include conducting risk assessments, internal audits, and vulnerability assessments to identify weak points in an organization’s processes that could be exploited for fraudulent activities.


Understanding Fraud Analytics – New Way to Combat Fraud

Fraud analytics relies on the use of big data analysis to detect and prevent online financial fraud. It can help financial organizations learn about ongoing fraud trends and build safeguards to protect themselves.

More and more people rely on online banking for the convenience it offers. The 2020 lockdown acted as a catalyst for online banking. With the ever-increasing number of users, online financial fraud numbers have also gone up. Out of all types of financial fraud, Account takeover fraud is the most prominent.

With fraud analytics, financial institutions can gain deeper insights into financial fraud, fraudulent behaviors, and how to protect against fraud.

Financial institutions today have to apply robust fraud management measures to ensure their and their customer’s security.

Challenge of Financial Fraud

Financial institutions are obligated to protect their customer’s sensitive information from fraudsters. Over time, keeping information secure has become more complex as customers can access their accounts from multiple channels. Customers can use mobile banking apps, online banking, or call the bank’s customer service to perform financial activities.

This opens up the bank to several risk points. A fraudster could log in using the mobile app with stolen credentials and the bank would have no way to distinguish between a legit user and a fraudster.

It is also becoming increasingly easy for fraudsters to steal credentials. To give you an idea, the dark web has over 15 billion credentials that you can buy for next to nothing.

The average price for banking credentials is as low as $15.43 for a single consumer. If a fraudster wants to buy credentials for an organization’s key system, the average price is $3,139.

Types of Online Financial Crime

  • Account Takeover Fraud

ATO is one of the most prominent types of financial fraud. A fraudster uses stolen credentials to take over an existing online account. The fraudster then uses the account to commit financial fraud.

  • Sim Swap

Sim Swapping is another type of account takeover fraud. In this type of fraud, the fraudster uses a victim’s personal information, to try and convince the mobile company to port the victim’s phone to another number.

When the mobile company ports the number, the fraudster conducts financial fraud and the victim is unaware until it’s too late.

  • Phishing Attacks

These types of attacks are aimed to target less technically proficient users. This type of fraud happens when a fraudster impersonates a legit company/service provider. Then the fraudster sends a text/email to the user asking them for their personal information.

Once a less suspecting victim shares their personal information, the fraud begins.

  • Malware

Fraudsters use several methods to gain a victim’s personal information. This includes trying to trick a victim to install malicious programs on their device. This malware is designed to log keystrokes, corrupt data, or make the device unusable until the victim pays a ransom.

  • Card Not Present

CNP is becoming more prevalent because of a growing trend of eCommerce shopping. Fraudsters use stolen credit card accounts to make online transactions.

How do Fraud Analytics Help in Financial Fraud Management?

Online fraud is ever evolving and financial institutions need to keep finding new ways to combat fraud. Traditional methods of fighting fraud are not up to the standards. Fortunately, there is a huge pile of data that financial institutions can use to predict and detect fraud. 

Just having a username and password isn’t enough to protect customers and institutions against fraud. When someone accesses, or attempts to access a victim’s information, there is behavioral data that banks can use to verify if this is a legitimate transaction or not. 

Vital data that financial institutions can use to detect fraud include:

  • What device a user is using?
  • If the device has been previously registered with the bank.
  • Can the user verify their identity with a fingerprint?
  • Does the transaction data fit the previous patterns?

These types of data can be broken down into four categories:

  • Knowledge: Something that a user knows, such as passwords, identity information, username, etc.
  • Possession: This type of data signifies something that a user has, such as a mobile phone.
  • Inherence: This is something that a user is, such as a fingerprint, retinal data, palm print, etc.
  • Behavioral: Something that a user does. Any activities that form a pattern, such as their requested transaction, or a series of transactions.

By analyzing these data and combining them with big data, fraud analysts can discover hidden patterns. 

Banks, since forever have been operating on a fixed set of rules that examine requests and provide a yes/no decision. These rules are based on increasing fraud techniques which expands the rules sets and these rules end up becoming too complex. 

Even the most complex traditional rules don’t adapt to hidden or unknown threats. Having systems that haven’t adapted to the latest developments leads to a huge number of false positives.

Machine learning solutions can collect massive amounts of data. These solutions can also analyze heaps of data and assign a real-time risk score for a customer. 

This is how fraud analytics help in detecting and preventing online financial fraud.

ML Models for Fraud Detection and Prevention

Fraud analytics is applying machine learning techniques to financial data. Fraud analysts use machine learning to examine all the valuable data to determine whether the transaction is high-risk or low-risk.

Based on the outcome, machine learning solutions offer recommendations to either allow or block the transaction. There are also cases where multi-factor authentication is needed before approving a transaction.

There are two different types of machine learning solutions. Unsupervised, or supervised. Unsupervised machine learning models analyze unstable data sets to find anomalies in the data. The model can also detect otherwise hidden relationships in the data to suggest a function or instruction set to describe the underlying dimensions of the data. 

Supervised machine learning models on the other hand are trained using labelled data. These models predict the likelihood of fraud. The way to train supervised models is by presenting them with legitimate and fraudulent data and commanding them to analyze the data to develop an instruction set or an algorithm. 

This algorithm is then used on other examples to verify the capabilities of the model. A perfectly trained supervised machine learning model can identify known and unknown patterns. These models are most likely to provide an accurate risk score for a requested transaction.

Data Analytics Techniques to Fight Financial Fraud

Data science is also a part of the solution to fight fraud. Financial institutions collect behavioral, device, and transactional data of every customer. Analyzing this data through a fraud detection system can help in the detection and prevention of financial fraud. 

But the analysis can only be as great as the data available in the data set. If a financial institution has great data available, there are several data analysis techniques that a machine learning-based fraud system can use to fight fraud. 

Predictive analysis is looking at available data and making predictions about the future. Using past events to figure out a pattern and then showcase the potential prosperity for fraud.

Pattern recognition is another data analytics technique that businesses can use to combat fraud. Machine learning models analyze data sets to detect anomalies and identify patterns that are different.

Machine learning algorithms can learn from the data and make predictions for future events.

Forensic analytics is examining the causes and consequences of a financial fraud event. By analyzing the data and relationships between the cause and the consequences, it is possible to identify potentially fraudulent behavior and expose cooperation between fraudsters.


Marketplace Fraud Trends

Marketplace fraud is as the name suggests. A buyer or seller makes false claims through a company. The fraud could be as simple as making false claims about the quality of products and services, or selling different items as advertised.

An online marketplace provides a platform that buyers and sellers to find one another. eBay is the father of online marketplaces. Launched in 1995, it opened the floodgates for other online marketplaces.

Since then, online marketplaces have grown to offer so much more. Any service or product you could think of, you’d be able to find a marketplace for it.

Marketplace Fraud Trends

At its core, the fraud marketplace can be broken into two categories. Buyer scams and seller scams. You’ll be able to find scammers on both sides of the transaction. 

Here’s a breakdown of the common buyer and seller marketplace fraud trends:

Types of Buyer Fraud

Scams that target buyers are more than common on online marketplaces. Here are the most common types of fraud that scammers use to trick buyers.

1. Counterfeit Goods

Millions want the luxury of expensive goods but don’t have the money to experience the luxury. To match this demand, fake luxury goods are produced in countries like China, Turkey, and others. Online marketplaces face a lot of issues with counterfeit goods.

Customers who can’t differentiate between original goods and counterfeit tend to fall for these scams.

Sellers are extremely good at tricking people into believing that they’re selling a legit item. Customers often fall prey to paying absurd amounts of money for a fake item.

The best way to prevent this fraud is to research about possible counterfeits. There are online forums such as Reddit that have communities that can help you decide whether a good is legit or fake.

2. Non-Delivery Scams

This is another common marketplace fraud trend. The best way to scam a buyer is by selling an item that the scammer never intends to deliver.

There are situations where the seller makes up a fake advertisement and doesn’t have anything to sell. You can probably find photos that look suspicious and the seller may not be able to answer specific questions. 

The best way to tackle this fraud is to always ask for secondary images and images from different angles. You can ask the seller to also send a photo of the product and a piece of paper with your name written on it. 

This is in no way a complete solution as a lot of scammers do have the item in their possession. By making fake listings, sellers can sell a single item multiple times to multiple victims without delivering anything. 

Some ways to spot this type of fraud include:

  • Check reviews and comments. Especially look if anyone has mentioned being scammed by this seller. 
  • Ask whether you can pick up the item in person and pay via cash. If the sellers tell you they can only send it via post, it’s probably a scam.
  • Always be wary of people who want you to pay using cryptocurrencies or use any non-secure payment methods. Apart from cryptocurrencies, look out for international fund transfers, money orders, and pre-loaded gift cards.
  • If the seller pushes you to make the money transfer as soon as possible. And if they try to give some enticing offer to sell you the product as soon as possible, they’re trying to manipulate you into buying.
  • If the seller requests that you communicate or pay outside of the Facebook marketplace, then it is most likely a scammer.

3. Phishing Scams

Phishing scams are one of the most common types of scams you’ll find online. These types of scams can be just as common on online marketplaces as they are elsewhere. 

A phishing scam is designed to steal your personal information to defraud you. To make this type of fraud happen, fraudsters make up a fake listing. These listings can contain links to malicious websites that are designed to steal your data.

The best way to identify phishing scams is when the scammer asks for your personal information. Sensitive information that makes no sense to ask for while purchasing something.

Any sensitive information you provide to the scammer can be used to engage in fraud.

4. Rental Scams

Rental scams are growing at an alarming pace. Scammers make up fake listings for properties, rooms, boats, sports arenas, etc.

Once someone shows an interest, the scammer asks for an upfront payment or deposit to secure the rental. After the buyer makes the payment, they lose their money as there is no rental place/equipment to use.

To prevent yourself from getting scammed, don’t rent on marketplaces that aren’t built for specifically renting services. Moreover, you can ask to see the place/equipment first and pay money in person.

5. Ticket Scams

If you’re on the hunt for tickets to a sold-out Foo Fighters concert, seeking a Lollapalooza ticket, or coming across unbelievably cheap entry to a famous art gallery on Facebook Marketplace, beware of ticket scams.

Scammers are adept at selling counterfeit tickets that look genuine but will leave you disappointed on the night of the event. To safeguard yourself, exercise extreme caution and only purchase tickets from authorized sellers and resellers.

While legitimate ticket touts do exist, selling tickets at a premium, there are just as many scammers peddling expensive forgeries, with Facebook Marketplace being a preferred platform for their schemes. Stay vigilant and follow these guidelines to avoid falling victim to ticket scams:

Purchase tickets only from authorized sellers and resellers.

  • Be wary of deals that seem too good to be true or significantly cheaper than the regular ticket price.
  • Verify the seller’s legitimacy by checking their reputation, reviews, or feedback from previous buyers.
  • Avoid using insecure or non-refundable payment methods like bank transfers or cryptocurrency.
  • Exercise caution with electronic or print-at-home tickets, as they can be easily forged and sent by scammers via email.
  • Cross-check ticket details, including the date, time, venue, and seating information, against the official event information to spot potential discrepancies in the scammer’s advertisement.
  • Compare the ticket’s appearance with an official one to detect signs of counterfeiting.
  • Be cautious of sellers who rush you into making a payment.
  • If possible, meet the seller in person to verify the authenticity of the tickets before purchasing. Trust your instincts and thoroughly assess the legitimacy of the ticket purchase from the seller.
  • Maintain all communication and documentation related to your ticket purchase as evidence for potential complaints.

6. Pet Scams

The pandemic and the rise of remote work have sparked increased interest in pet ownership. Unfortunately, scammers have exploited this trend by creating fake listings for pedigree puppies, kittens, and other popular pets on Facebook Marketplace.

To avoid being defrauded by pet scams, follow this simple checklist:

  • Visit the seller in person to verify the existence of the pet, its health, and the conditions it is kept in.
  • Do not make upfront payments for vaccines or unnecessary charges.
  • Only provide a deposit if you are certain about the seller’s legitimacy.
  • Use secure payment services for transactions.
  • Preferably, pay for the pet when you pick it up to ensure its authenticity.

Seller Scams

Sellers are not exempt from fraud, and awareness of potential pitfalls is crucial to safeguard themselves. Here are some common seller scams:

  1. Payment and Overpayment Scams

Always verify that you have received a payment from the buyer and that it has completely cleared before offering any refund. Use payment methods that cannot be reversed at the last minute.

  1. Returns Scams

Wait until you have received the returned item and checked its condition before issuing a refund.

  1. Electronic Payment Delay Scams

Never allow a buyer to leave with the item until their payment has fully cleared.

  1. 2FA Scams

Avoid sharing your phone number and 2FA codes with anyone you meet online, as they may exploit them for fraudulent purposes.

  1. Phishing Scams

Be cautious of suspicious inquiries and limit sharing of personal information with potential buyers. Use secure communication channels and verified payment methods.

Always trust your instincts and proceed with caution when dealing with buyers or sellers on online platforms like Facebook Marketplace or others. Following these guidelines can help you avoid falling victim to scams.


Can Strong Fraud Protection Bring in More Customers?

According to several surveys, it has become evident that strong fraud protection is the first thing in banking customers’ minds.

In this world of growing fraud, it’s no surprise that customers want some sense of security. The banking and financial services landscape has grown at an exceptional pace in the last decade. Fraudsters have taken complete advantage of these untested changes. Resulting in higher-than-ever fraud records every year.

In the UK, trade bodies have asked to consider fraud levels a national threat. Financial services businesses have increased their investment in fraud prevention and ID authentication solutions.

What Customers Want From Banking Institutions?

Since the start of the growth of digital banking, customers want strong authentication above everything else. It has become the primary deciding factor when it comes to choosing a financial service provider.

In EMEA countries, great fraud protection is the number one factor when choosing financial services. 

Here’s a breakdown of the percentage of people in each country who put security above everything else:

  • Germany – 36%
  • South Africa – 34%
  • Sweden – 32%
  • UK – 36%

Incredible level of fraud protection as a priority has been growing for customers. Businesses that have failed reputation around fraud protection tend to be less attractive to customers. 

With the growing number of people wanting great fraud protection, a business that can make it happen will gain a competitive advantage.

Fraud Attacks and Highlights in Media

Media coverage of the number of growing attacks in recent years has made customers more aware of security. Around 1 in 4, customers believe that their identities could have been stolen and used by fraudsters to open fake accounts.

The increased coverage by the media has helped customers understand the necessity of protecting their identities and protecting themselves from fraud. One in two customers even understand the importance of protecting their identity to help prevent money laundering.

Friction is a Problem

Security checks by financial institutions have increased globally. Each country has its own regulatory body that set the rules and guides for security checks. In the last 5 years, customers have seen significant growth in online ID checks when signing up online and making purchases. 

One in four South Africans has stopped or reduced their use of credit cards for online transactions because of the time-consuming checks. In the UK and Germany, the number is around 1 out of every 5 people. 

This is not to say that consumers want fraud protection methods to be eliminated from the process. It is clear that customers want a secure service provider but they don’t want the transaction to be so full of friction that it takes hours or days. 

Fast onboarding and ease of use are the biggest drivers of the digital banking industry. Almost half of all consumers across the UK, Germany, and Sweden want quick onboarding times. 

While customers want stronger and more effective fraud control and prevention methods, they also want a quick process.

Growing Number of Authentication Methods

Only a couple of years ago, biometric checks were considered an uncertain method of authentication. Today, biometric authentication is the preferred method of authentication. 

Fingerprint verification ranks the highest when it comes to authentication methods. South Africans out of all the countries showed the highest preference for fingerprint authentication. Face scans and iris scans are also ranked among the other top 5 customer authentication methods.

Authentication using passcodes (One time passwords sent through banking apps or SMS messages) is still a highly ranked feature. The use of usernames and passwords is falling drastically, but they’re still an important part of multi-factor authentication.

This also suggests that there’s a growing suite of authentication methods allowing consumers to access their accounts and transact online. 


Consumers have a huge number of expectations of their financial service providers and the level of fraud protection they provide. Organizations have to strike a balance between alternative providers and completely frictionless experiences. 

Consumers are also aware of how relentless fraudsters are and they expect to be protected. As long as the friction is ideal for the circumstances and the level of risk is high, customers will be fine with additional verification checks. 

The key for providers is to understand that ID verification isn’t just about preventing fraud. It is also part of an organizational process. Great fraud protection provides consumers with a competitive advantage and it should play a major role.

Finance Fraud

What is Transaction Fraud and How to Prevent Transaction Fraud?

Today, people can use business services globally. Digital transactions allow consumers to connect with brands all over the world and take advantage of eCommerce opportunities.

Building trust in digital commodities is ideal for your business to succeed. Businesses don’t know who exactly they’re transacting with. So, transacting online requires verifying identities and preventing online transaction fraud.

Apart from customer onboarding, businesses have to continue to protect themselves from transaction fraud. Businesses should be able to identify suspicious activities or anomalies intelligently and generate accurate and timely feedback on the transactions.

In this guide, we’ll cover what is transaction fraud and how to detect transaction fraud.

What is Transaction Fraud?

Transaction fraud is a major risk for any business that does business online. The most common types of transactional fraud include identity fraud, fake payment methods, or the use of fake information by a fraudster. 

Transaction fraud committed by organized criminals leads to legit customers being victimized. Individuals that commit transaction fraud seek to abuse the business policies and chargeback policies. 

According to reports, criminals stole more than £609.8 million through authorized and unauthorized transaction fraud.

The biggest problem is that the situation is continuing to get worse.

Types of Transaction Fraud

1. Authorized Fraud

This type of transaction fraud tricks a customer into making a payment. The methods to conduct this type of fraud include:

  • Purchase scams
  • Investment scams
  • Romance and advance fee scams
  • Invoice fraud
  • CEO fraud and impersonation

These frauds rely on social engineering, fake phone calls, text messages, emails, etc. to trick customers into making a payment.

2. Authorized Push Payment (APP) Fraud

Authorized push payment (APP) fraud type of fraud is similar to authorized payment fraud. Fraudsters trick customers into sending payments into an account controlled by a criminal. Fraudsters could act as a government department, debt collection agency, or someone else to get payments.

3. Unauthorized Fraud

Another type of money transfer fraud involves payments that happen without the victim’s knowledge. This type of fraud is also known as account takeover fraud or ATO.

Fraudsters use several techniques to make this type of fraud happen:

  • Phishing emails
  • Fake call centers
  • Device compromise 
  • SIM swap
  • Malware and ID spoofing

4. Account Takeover Fraud

Account takeover fraud is a type of ID theft and a very common type of transaction fraud. Fraudsters can’t take over an account without stealing users’ personal information such as account credentials, security question answers, and other account data.

5. Card Not Present Fraud

CNP is also referred to as ‘remote purchase fraud’, this type of card payment fraud makes unauthorized use of stolen or leaked card details. Most of the information is obtained through data breaches, phishing emails, or purchases on the dark web.

6. Lost or Stolen Card

As the name suggests, this type of fraud happens whenever a user loses their card or it gets stolen. Fraudsters use a card without the user’s permission and usually without the user’s knowledge. 

7. Chargeback Fraud

Chargeback fraud or credit card dispute fraud is an intentional attempt by a cardholder to make an illegitimate chargeback to the card after an online purchase. 

Customers who do chargeback fraud intentionally tend to use these reasons most commonly:

  • The charge on the card is not recognized by the user.
  • The product or service hasn’t been received.
  • The product was damaged, defective, or didn’t match the description.
  • The card was stolen or used without consent.

Strategies to Prevent Transaction Fraud

  1. Verify Customers at Onboarding

The best way to beat fraud is to verify customers during onboarding. The best practice in transaction fraud prevention is to recognize risk during the earliest stages of building a relationship with a customer.

Use online document solutions to onboard customers from all over the globe. Keep track of every small activity that a customer does and flag anything that looks suspicious or out of character.

  1. Take a Risk-Based Approach

Risk assessment is more crucial for businesses than what people think. A risk-based approach to transactions helps in effective and efficient transaction monitoring.

A risk-based approach doesn’t need to cover all scenarios and it should be sufficient to understand each product or service and sales channel. When you segment customers, products, and services in this way, a business can carry out custom-made transaction monitoring.

  1. Refine the Process

You can expect to detect and prevent fraud with any run-of-the-mill process. The entire fraud detection process should be a combination of customizable workflows, adaptive rules, strict rules, CDD and EDD methods, and so much more.

Without combining multiple techniques into a single workflow, it’s almost impossible to detect new-age fraud. There’s no single “perfect fraud detection” solution out there. So as a business, you have to combine multiple solutions to ensure your business and customers are safe from fraud.

Every single component should provide some kind of value. Successful fraud detection and prevention should happen at every step, not just one step.


5 Ways to Fight First Party & Synthetic Identity Fraud

Synthetic fraud and first-party fraud is becoming a major challenge. Both first-party fraud and synthetic fraud are hard to detect. In this guide, we’ll dive deeper into how banks and telecom organizations can identify these types of fraud without adding friction to the process of real customers.

The biggest problem with first-party fraud is figuring out real customers from fake ones. Making the onboarding process too difficult can discourage genuine customers from signing up. Banks and telecom have to make the process easier to encourage business. At the same time, they need to prevent fake customers from signing up.

Without properly analyzing these fabricated customers, businesses are at a higher risk of onboarding fraudsters. Here are the top 5 ways for businesses to fight first-party fraud and synthetic identity fraud.

Tips to Fight First Party & Synthetic Identity Fraud

Here are some ways businesses can employ to fight first-party fraud and synthetic fraud. 

1. Learn the Difference Between Bad Debt and Intentional Bad Debt

Businesses need to be aware of the differences between intentional and unintentional bad debt or fraud. With the right type of analytics, basic patterns of intentionality can become easy to spot. These include linked accounts that people used to pay fake bills for each other or to mimic payroll deposits.

2. Learn to Characterize Fraud

This is where a lot of businesses fail. To prevent fraud, first businesses must learn to correctly characterize fraud. Fraudsters try to showcase fraudulent activities as bad debts. 

Characterizing fraud will help you identify patterns and common methods that fraudsters use. Knowledge of common methods can then be passed on to the employees.

3. Define Rules

If your organization doesn’t have a set of pre-defined rules for fraud prevention, you’ll always face challenges against fraud.

A business should always have some pre-defined rules. Moreover, there should be a model to perform link analysis, this helps in examining data for known patterns. 

Some of the most common signs of fraud include phone numbers, names, email addresses, and other identifiers that fraudsters use to apply for loans, and other forms of debt over and over again.

Fraudsters use the same information repeatedly to convert a fake ID into a legit-looking one with some financial history.

4. Enhance Sign-Up Process

Knowing that you know common signs and tricks used by fraudsters, you can implement methods to improve your onboarding process. You can monitor the links between applications. 

As fraudsters use the same information over and over again, you can look for declined applications due to credit risk, or new applications where very little information is provided. 

Make it hard for fraudsters to use an identity they’ve created to sign-up. At the same time, ensure that the onboarding process isn’t too complicated for the ordinary user.

5. Tag Suspicious Activities

There will be times when you won’t be able to figure out if the account is fraudulent or not due to a lack of evidence. Instead of outright rejecting/accepting the application, you should tag the account as suspicious.

This is a part of enhanced due diligence (EDD). Once the account is opened and credit is provided, make sure to closely monitor the account for any suspicious or “out of behavior” activities.

You can look for sudden changes in the account information (Name, address, banking information, etc). This is one of the most common ways to detect fraudulent activities.

Conclusion – Be Proactive While Fighting Fraud

Fraudsters are always on the move, looking for new ways to exploit financial institutions, so it makes sense to be proactive. Organizations have to be extra vigilant and need to provide the level of customer experience that has become standard.

It’s high time to combine fraud prevention methods and user-friendly customer onboarding techniques to come up with a seamless experience.


Link Analysis for Fraud Detection

Link analysis is a powerful analytical technique that allows us to examine the relationships between entities or objects. In the context of fraud detection, link analysis can help us identify connections between individuals, transactions, and other data points that might indicate fraudulent behavior.

In this guide, we’ll explore what link analysis is, how it works, and how it can be used to spot fraud.

What is Link Analysis?

Link analysis is a type of data analysis. At its core, it focuses on the relationships between objects or entities. It is commonly used in law enforcement, intelligence analysis, and fraud detection.

In link analysis, data are represented as nodes (also known as vertices). The relationships between objects and entities are represented as edges. Nodes can represent anything from individuals to transactions to organizations, and edges represent the connections between them.

For example, in a network of financial transactions, nodes might represent bank accounts or credit card numbers, and edges might represent the transfers of money between them.

How Does Link Analysis Work?

Link analysis works by analyzing the patterns of connections between nodes in a network. Businesses and entities can rely on several methods to do link analysis, but the most preferred option is a graph database. 

In a graph database, data is represented as nodes and edges, just like in link analysis. However, graph databases have some additional features that make them particularly useful for link analysis.

One of these features is the ability to perform queries that traverse the edges of the graph. For example, we might want to find all the bank accounts that are connected to a particular credit card number, or all the transactions that involve a particular individual.

Another feature of graph databases is the ability to perform graph algorithms. These algorithms can be used to identify patterns in the data that might indicate fraud. For example, we might use an algorithm to identify clusters of nodes that are tightly connected, which might indicate a network of fraudulent activity.

How Can Link Analysis Help Spot Fraud?

Link analysis can be a powerful tool for fraud detection because it allows us to examine the relationships between data points. By identifying connections between individuals, transactions, and other data points, we can uncover patterns of behavior that might indicate fraud.

For example, suppose we are investigating a case of credit card fraud. Using link analysis, we might discover that several different credit card numbers are used to make purchases at the same set of stores. This might indicate that the fraudsters are using a “shopping list” of stores to target.

We might also discover that the credit card numbers are all being used from the same IP address, or that they are all linked to a particular bank account. These connections might further indicate that the fraudsters are working together and using a common set of resources.

Link analysis can also help us identify unusual or unexpected patterns of behavior. For example, suppose we are analyzing a set of financial transactions. By using link analysis, we might discover that a particular individual is involved in a large number of significantly larger transactions than their typical transactions. This might indicate that the individual is engaged in money laundering or other fraudulent activity.


Link analysis is a powerful tool for fraud detection because it allows us to examine the relationships between data points. By identifying connections between individuals, transactions, and other data points, we can uncover patterns of behavior that might indicate fraud. Link analysis can help us identify unusual or unexpected patterns of behavior, identify patterns of behavior over time, and identify networks of fraudulent activity. This can be especially useful in cases where the fraudsters are working together, as link analysis can help us uncover these networks and identify key players.

However, it’s important to note that link analysis is not a magic bullet for fraud detection. It requires skilled analysts who can interpret the data and identify meaningful patterns. In addition, link analysis is just one tool in the fraud detection toolkit – it should be used in combination with other techniques, such as data mining, machine learning, and traditional investigative methods.

Another potential limitation of link analysis is that it relies on the availability and quality of data. If the data is incomplete or inaccurate, link analysis may not be able to uncover meaningful patterns. It’s important to ensure that the data is accurate and up-to-date before performing link analysis.


Changes in Fraud Landscape

Digital banking has opened up more means for fraudsters to trick financial institutions, lenders, or end customers. To keep up, businesses have transformed their operations to provide valuable digital banking experience to customers, and combat fraud.

Banks all over the world are now focusing on seamless onboarding experiences. But this rapid growth in digital banking has also allowed fraudsters to become more creative. The numbers around digital banking fraud, ID theft, and data breaches are increasing rapidly.

In this blog, we’ll outline the common types of fraud, and how and why they’re changing. We’ll also be sharing ways lenders can protect themselves against evolving fraud. 

First off, let’s take a look at the common types of fraud:

What is First-Party Fraud?

First-Party fraud is when a person knowingly falsifies their identity or gives false information for financial or material gain. Common examples include exaggerating their income, fabricating their employment, or providing fake information to take advantage of some services.

Business often categorizes first-party fraud as credit loss and is written off as bad debt. This leads to issues in the long run for businesses trying to figure out how much they’ve lost. The data makes them able to make future lending decisions, and build fraud prevention practices:

Common types of first-party fraud include:

  • Fronting

Fronting is when businesses set up services in someone else’s name to save money. Kids applying for car insurance under their parent’s name to get cheaper insurance.

  • Address Fronting

Address fronting is when someone uses a different application to get a cheaper service. Someone could sign up for a service in a cheaper area, using a fake address instead of using the real address which costs more money.

  • Chargeback Fraud

Chargeback fraud is often called “friendly fraud”. This fraud happens when a user denies making a purchase on a credit or debit card to get a refund from the credit card provider.

  • De-Shopping

 It’s a type of fraud that users do when they buy clothes or other items with the intention of returning them after using them and getting a full refund.

  • Goods Lost in Transit Fraud

This is a type of fraud that’s increasing at an alarming pace. In this, customers order goods online and claim that they haven’t been delivered. Some buyers claim that the products have been damaged, or even return empty boxes to get a refund.

How is First-Party Fraud Changing?

The type of people that cause first-party fraud has changed significantly during the pandemic. During the pandemic, customers with excellent credit scores and a good repayment history found themselves struggling financially.

According to a report by CIFAS, 1 out of 13 Brits admitted to committing one instance of first-party fraud last year.

What is Second-Party Fraud?

Second-party fraud is when an individual shares their identity or personal information with someone else to commit fraud. The biggest example of second-party fraud includes money mulling.

In money mulling, an individual provides access to someone else to move money in or out of their accounts for a small fee. While a lot of people consider this a victimless crime, it can have some victims. If the money being moved is used to fund violent crimes, terrorism, or drugs, it can be victim related.

How is Second Party Fraud Changing?

More than often, young people have been the target of second-party fraud. Fraudsters love to use social media to target young people. The trend has changed as more and more older people are involved. As with first-party fraud, the pandemic has pushed more people into financial problems. This makes them more vulnerable to fraudsters.

What is Third-Party Fraud?

Third-party fraud in general is known as identity theft. Fraudsters steal the user’s identity or personal details and use them without the user’s consent. It also includes manufactured identities called synthetic identities. 

There’s a clear victim when it comes to third-party fraud. To a trained eye, it can be easy to spot instances of fraud. It also includes manufactured identities, with the fraudster creating a new identity using stolen and false information.

Third-party fraud is the most common type of fraud that happens throughout the globe. 

How is Third-Party Fraud Changing?

Fraud varies significantly across the lender’s portfolios and the type of products they offer. According to reports, third-party fraud is at risk of growing for current accounts, loans, cards, and savings. Mortgages and asset finance are at an increased risk of first-party fraud. 

Combating fraud is challenging, but with technologies like online document verification, online bank verification, or online proof of address verification services can help.


Fraud Risk Management Practices

According to a report by ACFE, organizations lose about 5% of their annual revenue to fraud annually. This is because businesses don’t focus much on common fraud risk management practices. This leads to companies not being able to protect themselves against fraud, and meet bottom-line compliance requirements.

As more and more financial institutions are required to bear the burden of compliance, they need to know the appropriate methods of risk management.

These risk management frameworks help businesses to identify and respond to fraud. Being able to assess risk early on helps them protect organizations against common fraud types. Businesses can implement fraud risk management practices and gain an advantage over their competition.

Benefits of Fraud Risk Management Practices

Financial institutions that implement basic and advanced fraud risk management practices tend to reap additional benefits.

The most common benefits include the following:

  • Reduced financial losses due to fraud. 
  • Reduced costs of responding to fraud.
  • Better compliance with local and global regulatory requirements.
  • Enhanced employee awareness of employees against fraud throughout the organization.
  • Increased reporting of potential fraud and other ethical issues. 
  • Enhanced level of corporate governance.

Best Practices for Fraud Risk Management

Organizations don’t need over-the-top processes that add friction instead of reducing it. To reduce fraud, businesses need to reinforce their current models. This can be done using best practices for fraud risk management:

1. Invest in Ideal Technology

The right type of technology can make or break everything. Integrating technologies that help prevent fraud such as online document verification, proof of address verification software, bank verification software, etc.

Technologies like these can help organizations streamline the compliance process. Financial institutions can also verify which customers are real, and which are not.

Being able to clearly see through fraudulent practices is what businesses can do to reduce financial losses through fraud.

2. Build a Risk Insight Culture

Businesses can get instant benefits from risk insights. Risk insights can also improve the management decision-making process. Although, in order to maximize the long-term benefits, businesses need to take a systematic approach. Employees should know about risk awareness and should ensure continuous compliance in the financial process.

3. Understand Your Compliance Capabilities

Strong compliance provides benefits that are hard to measure. Business leaders need to identify their company alongside the level of their compliance capabilities. Knowing the journey helps organizations understand which approach they should take to improve compliance capabilities. 

4. Find Flexible Solutions

The fraud number keeps on increasing on existing channels and new channels. Finance leaders need to strengthen their ability to detect fraud and analytical capabilities.

Financial institutions need to leverage existing data to be able to improve fraud risk management capabilities. Fraud is getting complicated, thus making it vital for businesses to come up with flexible fraud risk management solutions. 

5. Consolidate All Data Sources into a Single Platform

There are thousands of fraud risk detection solutions available in the market. Businesses need to make sure that data captured from all these technologies are kept on a single platform. Consolidated data makes analysis and decision-making easier. 

This also avoids the creation of unnecessary data silos, which leads to instances of fraud.

6. Have an Omnichannel View of Fraud Detection

Organizations need to consider all digital channels if they want to manage risk effectively. An omnichannel approach to fraud risk management can minimizes the risk of a fraudster migrating to another channel after losing access to the first one. 

To be able to do this, businesses need to develop a single central platform to ensure data points and behavioral patterns can be accessed through all channels. 

7. Evaluate Risk Throughout the Customer Journey

The level of risk associated with a transaction should be assessed and handled before the customer reaches the final step of the payment. Risk management leaders must build fraud risk management systems that can assess risk from the beginning of a customer journey. 

This includes analyzing customer behavior, analyzing the use of bots, and scripts, monitoring account login/creation, and defining the risk of the action. They also need to implement ideal obstacles along the journey.

8. Build a Seamless Customer Experience

The risk management approach is different for each organization. No two organizations can follow the same steps and get the same results. A new approach is needed that can integrate fraud detection and customer verification technologies.

The goal of the process should be to eliminate fraud while trying to keep the customer onboarding experience as seamless as possible.

Risk management leaders should focus on streamlining the customer experience, and implementing frictionless customer verification processes.

9. Reduce the Cost of Fraud

When businesses focus on reducing the total cost of fraud instead of the rate of fraud, they are able to come up with better strategies. With this goal in mind, organizations can make informed decisions about how much they need to invest in fraud detection and prevention.