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.


Mobile Fraud – How Does it Work, How to Prevent it?

Chances are that you’re reading this blog on your smartphone. That’s because over 60% of all online traffic comes from smartphones. We use our mobile phones for a lot of things, online accounting, social media, emails, and so much more. We carry it with us all the time and use it for every small thing. Smartphones have become an integral part of our personal and professional lives. So, it makes sense that fraudsters would want to gain access to your smartphone.

Mobile fraud has become a major concern in recent years. Just by accessing a single device, fraudsters can take over every single thing they need to. The threat to personal finance and security is very real.

In this guide, we’ll cover the five biggest mobile fraud threats and the best fraud prevention best practices.

Techniques Fraudsters Use for Mobile Fraud

Fraudsters keep coming up with new and interesting ways to conduct fraudulent activities. Although, there are some tried and tested techniques that work in their favor. So here are the top 5 mobile fraud threats that fraudsters love to try:

1. SIM Cloning & SIM Swapping

A common mobile fraud technique that fraudsters use is to take over an individual’s online accounts. This helps them ‘socially engineer’ access to their bank account and other personal and financial data.

This is done by collecting personal data from multiple sources, including messaging and social media sources. Then they use this data to try and persuade the mobile operator to issue a new SIM that a fraudster uses to get all the one-time passwords (OTPs) to access your accounts.

If this method isn’t successful, fraudsters use smart card copying software or use remote hacking to clone a SIM Card.

Cloning a SIM card provides access to all the data, and account details. Through this, they can conduct all kinds of fraudulent activities.

2. Device Cloning

Device cloning is another commonly used mobile fraud technique fraudsters use. Our smartphones contain all the apps and personal data that you need to access services like online banking, online stores, etc.

Fraudsters can transfer data and services from one mobile device to another one, making a clone of the original device. Fraudsters can make calls and conduct transactions from cloned devices without specific checks.

3. Caller ID Spoofing

Your Caller ID is the number visible to the people you’re calling. This helps others to identify who the call is from. Fraudsters can create false caller IDs from a local service provider/company that the victim knows. When the victim picks up the call, the caller tries to obtain personal information under false pretenses.

Calls and messages are sent from this fake ID to trick the victims into divulging personal/confidential information. Once the call or message is answered, the fraudsters will use social engineering methods to persuade victims to provide confidential information.

4. Recycling Phone Numbers

When a mobile user’s account is closed, the mobile operator will release the phone number again after a short period of closing the account. Now the number can be reassigned to someone else and can be used by some other user.

Today, it has become a common practice that mobile numbers are associated with personal accounts. Allowing for the transfer of funds using mobile numbers. A lot of fraudsters activate old mobile numbers with the aim of finding a number that has been recently recycled.

This number can then be used to access accounts linked with the number.

5. Call Forwarding

Call Forwarding is another mobile fraud technique used by fraudsters. In some online transactions, customers are asked to prove whether they have the mobile in their possession or not. This is done by sending a one-time password to the customer.

Sometimes, fraudsters call or text an intended victim, asking them to forward their call on to someone else. This can be done for any fake reason. Once the victim forwards inbound calls and texts to a fraudster’s device, the fraudster will be able to access all the one-time passwords needed to access personal accounts.

Fraudsters can now access accounts, make payments, and conduct other frauds without the victim ever knowing.

Use of Real-Time Data for Preventing Mobile Fraud

Mobile phones have become an undeniable part of our lives. Without smartphones, there are hundreds of things we won’t be able to accomplish on regular basis.

Mobile phones provide unique data in that it is the only source of ‘dynamic’ data on what’s happening in ‘real-time’. This dynamic data can be used to immediately figure out if a device has been lost or stolen, or if a SIM card has been recently swapped. It can even help in figuring out if the inbound calls or texts have been forwarded.

By using mobile data, you can keep fraudsters out, and it’s also helpful in identifying good guys. Companies can do mobile data checks behind the scenes to access online services securely, quickly, and easily, and ensure that customers won’t fall prey to mobile fraud.


First-Party Fraud, and How To Prevent It?

The word fraud is used almost every day today. It’s not always hackers sitting behind multiple screens who conduct these frauds. Ordinary people with a little bit of knowledge also conduct fraud. In reality, a lot of customers end up sharing their personal information with fraudsters unknowingly. These fraudsters use this information to rack up huge credit card bills. In other cases, users end up committing fraud using their own information.  

Both of these types of fraud are called first-party fraud. 

Most of us assume that first-party fraud happens only in banks, but as telecom companies have entered the financial industry, so they’re also feeling the pinch. Debt collection agencies are leaking more profits and costs, trying to collect something that isn’t recoverable.

First-Party Fraud Affects Profitability

First-party fraud usually comprises 10% of the volume of credit card losses. These losses are also called bad debts. This huge risk often gets missed as it comes somewhere between the risk department, operations, and the fraud team. In other words, first-party fraud does not have an owner most of the time. 

Soiled fraud and collection departments can reduce the chances for fraudulent patterns to be discovered. While the relatively low volume of first-party fraud reduces its priority level, for some organizations, first-party fraud remains one of the biggest profit drains. 

In 2022, it is more vital than ever to take decisive actions and manage first-party fraud.

Why It’s Easy to Miss First-Party Fraud?

Traditional third-party fraud requires some kind of impersonation or stolen identity. Be it stolen credit card data, or someone taking over your identity. At some point, many victims of third-party fraud become aware of the crime when unknown transactions come up on their statements. 

Compared to third-party fraud, first-party fraud is often confused with credit risk problems. Accounts that don’t pay their debts are sent to collections for a progression of treatment. 

Unlike third-party fraud, the transactions happen with accurate information and they look like legit transactions. This makes first-party fraud much harder to spot. And in this way, first-party fraud can be eventually written off as it is uncollectible. This information is also sold to third-party external collection agencies.

Newer financial services providers are even more challenged in figuring out first-party fraud. Newcomers don’t have access to all the historical data that banks have to analyze which transactions are legit and which aren’t.

Be it an online bank, or a telecom service financing costly devices, all these organizations face similar challenges in fraud prevention.

Common Types of First-Party Fraud

There are different types of first-party frauds that organizations should know about:

  1. Sleeper Fraud: It occurs when a fraudster gets their hands on a type of credit, and over time builds up a reputation. As they build trust with the service provider over months, they can take maximum advantage of cash and any goods with these cards. Once they’ve racked up a huge debt, they leave this information and move on to the next one.
  2. Bust-Out Fraud: This type of fraud is also called hit-and-run fraud. It can happen in a type of financial service. It’s quick and sometimes easy, and credit cards and loans are the easiest targets. In some countries where cheques are in use or have slower clearing cycles, fraudsters can exploit these weaknesses to rack up a credit balance 10 times the normal limit. Then the fraudsters cash out before these transactions are even caught.

How Does First Party Fraud happen?

First-party fraud is highly opportunistic and it can be done on a small scale by a single fraudster or by a group of fraudsters. Both sleeper fraud and bust-out fraud can be conducted in an opportunistic fashion. 

Some of the first-party fraud schemes are executed in both ways. For example, in the UK, Europe, and the Middle East, the highly fluid mobility of university students creates conditions that are perfect for fraud. 

In this type of fraud, fraudsters gangs have focused on out-of-country students to buy their ID data and bank account information as these students go back to their home countries. There are many potential victims, as only 10% of foreign students stay in their country. Almost 90% of students go back to their home countries, thus their information is ripe for exploitation. 

Fraud with student credential fraud often starts with criminal gangs advertising in student unions and social media. Sometimes they even infiltrate family WhatsApp groups just to get their hands on some quick cash.

While these offers may be tempting to cash-strapped students, the fraudsters have different intentions. With 1.3 million students in the EU, you can see why this group is one of the biggest targets for fraudsters.

Strategies for Fighting First-Party Fraud

The biggest challenge with first-party fraud is distinguishing between fake and real customers. So, what can businesses do? Here are some strategies to try fighting first-party fraud:

  1. Learn to recognize the distinction between unintentional bad debt and intentional bad debt, or fraud. With the right type of analytics, patterns can start to become clear, and very evident. 
  2. You need to accurately categorize fraud as fraud, instead of calling it a bad debt. These instances should be called first-party fraud or synthetic identity fraud. This will help you to begin identifying patterns and common traits in the schemes fraudsters use. 
  3. Define clear rules and models and perform link analysis to analyze data for known fraud patterns. These common signs include phone numbers, names, email addresses, and other identifiers that fraudsters will use again and again to apply for loans, credit cards, accounts, and mobile subscriptions. 
  4. Improve sign-up and onboarding processes by using these analytics. By doing this, you can monitor for links between declined applications for credit risk and new applications where the same data is used for application. 
  5. If you don’t have enough evidence to mark a transaction as fraudulent, tag these accounts as suspicious accounts. Once an account is opened, and credit is extended, the account can be monitored more carefully for suspicious activity. Any sudden changes in account data can be a sign of fraudulent transactions about to happen.

Be Proactive With First Party Fraud

The rate of fraud is only increasing, so businesses need to be proactive in fraud prevention. For those fraudsters with established synthetic identities hidden in account portfolios, the high time for using these identities is now. 

At the same time, organizations that are keen to increase their customer base have had to increasingly look to digital channels, as face-to-face interactions have almost vanished. Increased criminal activity coupled with increased reliance on remote onboarding processes has made it harder to prevent fraud.

Businesses need to make sure that they act before fraudsters do.


Five Major Steps for Strengthening your ID Fraud Prevention Strategy

Customers demand a safe and secure environment. This means providing protection from data theft, Identity protection, protection from account takeover fraud, and more. But, this is not a one-sided process. Both organizations and customers need to follow practices that keep them safe online.

One of the best things that banks and other businesses can do is make sure that customers have all the necessary information to keep themselves secure. Not sharing passwords, OTPs, and using network networks are common online safety tips. 

Just by being vigilant, customers can protect their identities online. As for banks, they need to have thorough checklists and tests to make sure customers are who they claim to be. 

In this article, we’ll be going over tips that businesses can use to strengthen the ID fraud prevention strategy.

5 Tips to Make Your ID Fraud Prevention More Robust

1. Go Back to the Initial Customer Interaction Phase

Customers of today want complete security and convenience. More and more customers want a convenient online experience. The second largest group of consumers demands to be recognized during online transactions. This leads to a seamless customer experience. If you keep adding friction to the process, it can cause you to lose more customers. 

because of changing customer demands, they should be able to interact freely with the business. Letting customers do any activity they want can even lead to understanding customer behaviors. There’s no better way for you to gauge fraudsters than understand customer behaviors. 

If a business instantly recognizes who the customers are, it’ll be able to build defenses that can highlight fraudsters.

2. Understand Expectations and Capabilities of Your Customers

With the new age of modernization in the banking industry, customers from all demographics, age groups, and income brackets have increased their online activities. This is giving way to a whole range of new digital solutions and marketing techniques. 

But with increased online activities, comes an increased level of fraud risk. That’s not all, managing all customer expectations is a major challenge for businesses of all kinds. 

This leads to all new types of education and support for customers who are new to digital banking. Educating your customers is the surefire way to make them more susceptible to fraud.

3. Leverage Technology to Boost Customer Fraud Prevention

According to the latest surveys, its shown that companies that are investing in new solutions to prevent fraud are getting great results. Adopting newer technologies helps businesses stay on top of all the latest fraud trends. 

These investments are helping businesses streamline challenging processes such as:

They also help in preventing fraud by uncovering fraudulent users as soon as possible.

4. Outsource But Keep Fraud Prevention in Mind

Businesses that are scaling quickly and need to outsource to keep up with demand may be at risk of data breaches. Companies that carelessly outsource to other organizations may be at risk. Without proper due diligence, they may end up hiring companies that looking to steal sensitive data. 

While outsourcing is a valuable strategy, it can also increase the number of ID fraud and frauds in an organization. To ensure security, companies need to hire companies and conduct strict due diligence.

5. Focus More on Activities that Build Customer Trust

Organizations that establish a good trust-based relation with customers are more trusted. Goodwill follows them around which potential customers consider while onboarding. 

Customer trust can be earned in a couple of ways. But, you can include fraud prevention as well into the mix. Some common activities include:

Some reports suggest that customers want solutions that include passwords, One-Time Passwords (OTPs) sent to their registered numbers, and security questions. You can use any of the methods to ensure trust and boost productivity.


Machine Learning Technology for Detecting Fraud: How to Leverage Technologies?

In the last couple of years, the number of fraudulent services available in the market has increased. It has become essential for banks and financial institutions to employ machine learning technology that can help in fraud prevention.

While protecting customers by detecting fraud is a huge challenge, it should always be kept high on the agenda. But you do need to keep in mind that finding the balance between fraud prevention and customer experience is crucial for businesses. 

With the emergence of endless data sources, ready to be accessed at any given time. With greater control and accuracy over the data available, it opens banks up to new opportunities to detect fraudulent activities. Such as using machine learning technologies for fraud prevention.

Across the data landscape, we can see how the industry is slowly changing and allowing for better and more accurate results. Be it customer verification, customer validation, onboarding, decision making, or anything else. Machine learning for fraud detection is a great solution.

As many organizations have adopted traditional rule-based strategies, they need a lot of effort to manage. And with the increasing data points for better accuracy, the process becomes too large for humans. With the growth of digital traffic and the increasing need of identifying customers, institutions need better fraud prevention solutions. This includes the best machine learning algorithms for fraud detection.

Why Use Machine Learning for Fraud Detection?

With the ever-growing number of fraud services available in the market, it’s crucial to have a clear view of the fraud risk. With machine learning fraud detection, bank can understand their customer data better. 

As more and more consumers need instant decisioning, and process fulfillment. The need for faster and more accurate fraud checks has to be included in the customer journey. When making online decisions where customer journeys will be affected, it’s even more important that only these activities with a real risk of being fraudulent are being prevented.

At the same time, it’s also important to impact the experience of customers by subjecting them to unnecessary delays while doing customer verification. Additionally. There’s a limit to the effectiveness of the rule-based referral strategy as it requires a lot of effort to manage the number of permutations. 

Adopting machine learning technologies can help organizations build a smooth customer journey. This can be done while flagging potential fraudulent attempts which can impact the bottom line.

Common Machine Learning Misconception

1. Machine Learning is New

Machine learning technologies have been used for over 20 years across multiple industries. The technology has been helping businesses in making smarter decisions, streamlining processes and so much more. 

2. Machine Learning is Self-Learning

Machine learning models for fraud detection can keep evolving based on the recent problems they’ve solved. Within the identity and fraud department, it isn’t suitable to deploy auto-learning models as it makes governance easier. Model performance is continually monitored and seen where it has degraded. Replacement models will only be deployed with visibility of the differences between the current and the older models.

3. Supervised and Unsupervised Models

Supervised models don’t necessarily mean that there’s human involvement in every step. Even the supervised models operate according to the data fed to them.

Who Can Use Machine Learning Software?

While a lot of businesses already leverage machine learning technologies to complete specific processes. Implementing better automation in the fraud detection process is still an unseen phenomenon. However, increasing amounts of data sets can improve the ID verification process.

The use of ML is becoming more crucial for several businesses. Machine learning solutions can understand complicated relations between data sets within a business. 

Although access to machine learning for fraud detection has been limited, especially when it comes to fraud management. Traditionally, machine learning is often available only to bigger organizations, now even small-scale businesses are getting access to machine learning software.


5 Best Ways to Protect Businesses From Cyber Attacks

Businesses of all kinds have an obligation to try and protect their users. Protecting users from cyber attacks is a responsibility that every single business has to take on. Your existing and new customers need to know the best practices they can follow to stay protected. With bad actors becoming more and more creative, you need to be more vigilant and teach your customers to protect themselves from cyber-attacks. 

In this guide, we’ll outline the best 5 ways to protect users from cyber attacks. Let’s dive in.

Best Cyber Security Practices

Even the smallest of mistakes can cost you very dearly if you don’t pay attention online. There are some basic things organizations can do to protect their users and their data. If a hacker or bad actor can gain access to confidential information, it can cost your business millions of dollars. Here’s how to stay safe online:

1. Learn How to Detect Attacks

Cyber attacks can come in any shape and size. They can be in the form of phishing, ransomware, or pretexting. Out of all these attacks, social engineering attacks are the most dangerous and hardest to figure out. Organizations should have the ability to detect them as soon as possible. 

Every single member of your organization should learn how to detect social engineering attacks. Anyone who clicks on the wrong link or sends personal information to the wrong person, it’s an invitation to a data breach. 

Here are some of the most common methods used by bad actors during social engineering attacks:

  • Requests for the user or shared credentials
  • Request for financial or contractual information
  • Requests for user personal information
  • Unusual or suspicious links and files
  • Unusual or suspicious phone calls

2. Educate Users about Devices

To protect your users from cyber attacks, you need to educate them on some things. It helps in ensuring that every member of your organization is aware of the best practices to protect themselves. Businesses should also hold seminars after employee onboarding to prevent cyber attacks. 

Whenever your employees leave their desks, they should always lock their devices. Also, setting up personal passwords goes a long way in fraud prevention. You should educate users and refrain them from using third-party apps that aren’t trusted. 

3. Multi-Factor Authentication and Password Management

If you’re storing user data, and your users can log in to your website, then it’s essential to use multi-factor authentication methods. While a password helps in protecting you, MFA just adds another layer of security for the users and the businesses.

Make sure that all the employees and users change the default passwords as this is one of the biggest ways people get exploited. Also, never ever share passwords. MFA is a key to securing your devices and systems, as it forces the user to verify their identity. As the user has to provide a unique numerical code after entering the username-password, it prevents the risk of credential stealing.

4. Keep Up With Software and Hardware Practices

Software and hardware physical security practices can help ensure that you’re doing all that you can to keep your business secure. It can be anything, from using built-in defense functions or regularly updating software and hardware.

Choosing systems with built-in layers of defense boosts your organization’s cybersecurity the minute they’re running. There are endless solutions containing built-in security functions including data encryption and endpoint protection, these obstacles make it harder for bad actors to access your systems.

When it comes to software updates, most businesses and users ignore their importance. Prioritize updating the software and firmware on all the devices, as this allows them to function at an ideal level.

5. Choose the Ideal Technology

Finding a technology provider that offers all the solutions you need, all the while operating while being transparent isn’t easy. It may take some time to decide which vendor is the right fit for your business. 

Most vendors offer their customer hardening guides, these guides teach users how to keep their devices secure.

Choosing the ideal technology is crucial to a strong cybersecurity strategy. This also includes using the right technology for customer onboarding. DIRO online document verification technology can boost the onboarding process and eliminate the risk of fraud.

When you onboard the right type of users, you automatically reduce the risk of data breaches, account takeover fraud, and so much more.


Steps Payment Gateway Can Take to Detect and Prevent Online Fraud?

When you have started your online business, you wouldn’t consider online fraud as a challenge when you’re processing less than 10 transactions a day. However, when your business and the number of transactions increase, you need to be more careful. Statistics state that in 2018, US merchants lost an estimated $6.4 billion in payments card fraud. Small businesses especially face the highest number of frauds and an estimate of $155,000 per year.

Credit card processors offer merchants basic security measures to reduce the risks of credit card fraud. Although some merchants don’t offer seller protection, including PayPal, this is the case in the case of digital goods. You can decide which payment gateway to use. This also tells how your business will be protected in case of fraud transactions.

With the digital goods and services landscape on a boom, businesses of all sizes need to re-evaluate their position and tools when it comes to fraud management. In this article, we will take a look at the most effective techniques when it comes to tackling card payment fraud.

How to Prevent Payment Gateway Fraud?

1. Address Verification Solution

Address verification solutions are used to detect online fraud. When customers purchase items, they have to provide their billing address and ZIP code, and address verification solutions check whether this address is real or not. Part of a Card-not-present transaction, the payment gateway can send a request for user verification.’

2. Card Verification Value (CVV)

The CVV or Card Verification Value is a 3 or 4-digit code on credit cards. The code should never be stored on a merchant’s database. A CVV filter acts as an added security layer, allowing only the card owner to use the card. If an order is placed on the website and the CVV doesn’t match, the transaction should not go through. While making a CNP transaction (online, email, or telephone orders), merchants get the required information from the customers.

3. Device Identification

Device identification analyzes the computer instead of the person who’s visiting the website. It verifies the internet service, and browser to see if the transaction has to be approved. All the devices (phones, computers, tablets, etc) have a unique fingerprint, similar to human fingerprints. 

Fraudsters are unable to impersonate a computer’s unique identity, making it a viable option for your business against online payment fraud.

4. Flag Large Transactions

With stolen card information, fraudsters will take a shot at making transactions before the card is blocked. This would be harmful to your business where you’ll have to take on the cost of allowing fraudulent transactions to take place. Constant instances of fraud can lead to payment processors terminating your processing account.

You can easily limit the number of large transactions by specifying a flat amount. In addition to this, you can limit the number of failed transactions.

5. Payer Authentication (3-D Secure)

Payer authentication, sometimes called Verified by Visa (VeB) and MasterCard SecureCode, is a cardholder authentication measure that secures all online transactions for customers. This method allows cardholders to create a PIN that can be used during checkout. By using payer authentication, merchants are offered chargeback protection and lower interchange rates. 

This is one of the most sought-out fraud prevention tools that businesses rely on. 

6. High-Risk Countries

If you’re sending products overseas, then you need to exercise greater caution for these orders. Pay more attention to orders that come from high-risk countries. Customers in these countries need to be verified by the countries before the transactions are processed. 

According to the online fraud guide, some of the highest-risk countries include Israel, Malaysia, Egypt, Pakistan, Ukraine, Russia, Bulgaria, Romania, Lithuania, Nigeria, and Yugoslavia.

7. Risk Scoring

Risk scoring tools are based on statistical models designed to recognize fraudulent transactions based on a number of rules and regulations. When a payment is done on your website, the risk scoring tools will indicate the probability of the transactions being fraudulent. A higher probability of a transaction being fraudulent means that you should verify the transaction.


How to Prevent Fraud Proactively?

Today’s topic is related to the three important and effective ways to prevent the risk of fraud with a proactive approach. In order to use anti-fraud strategies, you need to be more alert and look around the corners to detect such happenings before they happen.

Since the rise of Covid-19, Fintech companies and other financial services have faced challenges to prevent fraud. 

According to the Aiteo Group, from 2018 to 2020, the cases of mobile and online fraud losses increased. And as per 27% of financial institutions’ surveys, online losses were more than 10%, and mobile losses were also over 10%. So, how can financial institutions and Fintech companies prevent such losses? 

The best way to prevent fraud is to build a proactive approach against the growing number of frauds. Here’s how FinTechs can prevent fraud proactively.

3 Key Elements to Prevent Proactive Frauds in Fintech:

1. Digital and Physical Identity Elements for Accurate Risk Assessment

According to Kount, it is important to have 100% verified documents of each user and customer to prevent fraud. Financial institutions and companies need to focus on verifying all the users’ documents with the help of digital and physical identity elements to ensure the accuracy of the documents. This helps in preventing the use of fake and stolen documents during onboarding.

When we talk about physical identity, we include social security numbers, payroll information, credit history, phone number, addresses, and tax IDs. And, when we talk about digital identity elements, we include account modification information, email addresses, login behavior, device information, payment information, account creations, and geolocation. The physical and digital elements are helpful for Fintech companies. Even financial institutions use digital ID data to get a complete profile of their users to minimize the risk of fraud.

2. Adaptive Authentication for Minimal Friction Customer Login Experiences

Adaptive authentication is an important step to verify a user’s identity to be able to trust the user or customer.  

If a user or customer is doubtful about their identity, then the financial institutions and banks can step up for multi-factor authentication. With the help of multifactor authentication (MFA), it will be easier to determine a user’s trust based on their transaction frequency, billing address, geolocation, IP address, a device used, and account age. 

According to the financial surveys, the account takeover fraud rates are over 10%, which is more than before the pandemic.

The two key benefits of using adaptive authentication are that it helps prevent account takeover attacks, and the second is that it helps provide a smooth login experience for returning and new customers. Adaptive authentication is valuable for banks and Fintech companies to expand their customer base with less friction and risk of fraud. 

According to Benjamin Teal, Fintech and AltFi Industry Expert for Equifax, “As we start to see younger consumers seek financial services, fraud mitigation strategies need to be refined to incorporate evolving consumer behavior. “

He further said, “We know that younger consumers are digitally native and have fewer obligations requiring them to remain in one place. As a result, they engage in behavior that looks very different to older consumers. Sophisticated strategies will factor in these generational differences and create experiences that lead to higher conversion while keeping bad actors out.”

3. Deep Data Insights to Determine Identity Trust

Financial institutions and FinTech companies need more than just payment-related data to uncover identity theft issues. Identity theft can appear in different stages during the account creation process, application, and payment event, and log in. And, to prevent the risk of identity theft, the FinTech companies and financial institutions need relevant data to decide if the customer is genuine or not.  

In the recent webinar, O’Neill, the Enterprise Account Executive for Kount, said, “It’s not necessarily enough to look at payments data to compete against some of the largest banks and card brands, which have massive data networks. “

O’Neill further said, “When it comes to payments-related data, it’s really easy for big banks to say they know what a normal payment looks like and therefore know what an abnormal payment looks like. And that’s true, but you need more than that to make the best decisions.”

There are other fraud indicators like email addresses, geolocation, country codes, transaction amounts, and BINs.  

And to prevent the fraud related to these indicators, it is better to use a global network of fraud and trust-related signals. 

Once the payment data is combined with all the above elements, you can get a more accurate image to prevent proactive fraud in Fintech.

DIRO for Proactive Fraud Prevention

  1. DIRO’s document verification technology is great for Fintech companies and financial institutes for the instant verification of documents from the original source.
  2. With the help of DIRO’s document verification, the companies can save time and resources.
  3. Manual verification of data can lead to various errors, and the chances are high that manual a person could not identify real or fake documents.
  4. With the help of DIROs, you can get 100% verified documents from the sources, which means no chance of fraud and fake document threats that can lead to huge losses if not identified at the time.

Tips to Protect your Business from Scammers

Businesses of all kinds face various internal and external attacks that can harm the businesses financially and in other ways. False invoices, money laundering, and phishing attempts are some of the most common examples of fraud. With the whole world forced to shift toward digital transformation, online scams aimed at businesses are getting more sophisticated. 

According to industry experts, every second an online merchant becomes a victim of some kind of fraud. What’s even worse is that most businesses take months to notice the fraud. Unfortunately, most businesses don’t know about the best practices they can use to enhance security and keep their businesses protected from fraudsters.

Practices to Prevent Fraud for Businesses

1. Know Your Customer

The COVID-19 pandemic was the primary cause of the surge in the rate of unemployment. Identity fraud costs reached up to $43 bn in 2020 out of the total fraud losses of $56 bn. 

Know Your Customer compliance program is a vital part of running an online business. Businesses are legally obligated to perform customer due diligence (CDD) checks to verify the identity of the customers to future-proof themselves from financial fraud. 

By building successful and efficient digital compliance programs, businesses can mitigate the risk of fraud all the while improving the customer experience during onboarding. The exact type of risk management solutions depends on the business type, but generally, they’re needed to identify and assess the threat a customer can pose to their business. According to industry experts, businesses should have automated checks in place for customers to eliminate the risk of fraud from the early stages.

2. Chargeback Fraud

Another common type of fraud that businesses have had to face since the rise of digital business operations is chargeback fraud. It happens when a consumer makes a purchase online using their card and then disputes the charge with the bank, and requests a chargeback from the bank even after getting the product or services they ordered.

Businesses operating in the industries like eCommerce, online dating, online gaming, and other purely online businesses tend to suffer from chargebacks and transaction fees whenever they onboard new customers. Although, businesses can reduce the risk of fraud by identifying the common patterns. 

3. Utilize Multiple Solutions

As there are so many areas where a company can be susceptible to attacks, it is vital to use a combination of digital defensive solutions, including:

  • Online ID verification
  • Online document verification
  • Continuous customer monitoring
  • Real-time transaction monitoring

One simple solution isn’t enough to keep the sophisticated types of fraud at bay, businesses need a combination of solutions for fraud detection and prevention.

4. Machine Learning Solutions

Machine learning solutions can be utilized by businesses regardless of the industry and business type. Firms that don’t have the resources to manage huge teams for customer verification can use machine learning solutions for customer verification and fraud detection. 

Machine learning can learn from huge data sources and detect normal payment patterns and detect suspicious transactions right away. Best algorithms can also identify fraudulent transactions on more than 50 different parameters.

DIRO for Fraud Detection & Prevention

Businesses often face fraud that revolves around fake and forged documents and identities. DIRO’s online business verification software helps businesses in detecting and prevent fraud in the early stages. DIRO can verify documents instantly and provide stronger proof of verification backed by verifiable credentials. By integrating DIRO into their solutions, businesses can easily improve fraud detection and prevention techniques.