The world we are is ever changing. A few decades back people depended solely on physical contact for exchange of goods and services. Technological advancements impact every profession-but its impact on Trade, Sales and Commerce has been dramatic. You do not need to meet a seller at a physical location to buy anything anymore, modern sellers and buyers are exposed to new tools, techniques and resources at their disposal and thus of course, they face new challenges.
Online Payment
Is a digital means of transaction between two parties. A way of making paying for goods and services through an electronic medium without the use of cash or checks.
The International Telecommunication Union reported that the internet is quickly becoming the first stop for people for making decision about buying services and products over the internet and that the number of internet users has reached 2.3 billion in 2011. The increase in the volume of transactions has given rise to numerous electronic payments (e-payments). Modern technology has paved the way for multi-functional devices making life easier, faster, better and more fun.
Online Payment Frauds
With so many customers storing card details and making payments online, fraudsters can’t resist taking advantage, and online payment fraud is rising fast.
Payment fraud is any false or illegal transaction done on the internet.
However, the development of e-payment methods have expanded and with it the fakery has inevitably kept pace. As a result, the consumers face a number of risks to personal information and have second thoughts of giving their credit account information over the internet.
“Online sellers will lose $130 billion to online payment fraud between 2018 and 2023” – Juniper Research
The dark web is a corner of the Internet where criminals can interact without being traced. This is where fraudsters buy and sell card details and share information about how to go about committing fraud.
Now that you know these, consider the following:
Use of Universal Payment Identification Code (UPIC): A UPIC is a unique account identifier that is issued by a financial Institution and is developed by Electronic Payment Network (EPN) . This will allow merchants doing e-business to receive e-payment without disclosing confidential banking information.
ACH Block (Automated Clearing House): This can place a “block” preventing ACH activity when the merchant account is unauthorized for ACH transaction. The merchant can receive alerts from the bank to ACH transactions that don‟t meet predefined conditions and then take the decision whether to accept or decline the transaction. This enables the merchant to stop e-fraud before it happens.
Fraud Detection Software/tools: The organization doing e-business should install fraud detection software/tools that can detect fraud and to reduce fraud rates. The software will give fraud results and the merchant will be able to make a decision whether to accept, reject or review the transaction. There are different categories of fraud detection tools which are grouped into validation service, proprietary data, purchase device tracing and multi-merchant data. Some of the tools are AVS – Address Verification Service, CVC – Card Verification Code and Risk Management Modules or Fraud Screens. According to CyberSource (2012), 56% of the merchants‟ survey made use of these tools.
IP Address Locator: It provides the merchant the data on the user‟s exact location and displays its origin on a map, giving approximately the city and state. It also calculates the distance between the billing address of the online buyer and the actual location of persons entering the orders. This is not fool proof that the visitor is using a proxy; however the merchants can apply authentication measures for transactions wherein there is a great difference in distance and take decisions on which transaction to review and which to allow. There should be a check to see if any users are using anonymous proxy servers to hide their IP address, which can be done by obtaining a list of anonymous proxy servers.
Minimizing Chargebacks: Merchants are concerned exclusively in minimizing charge backs. E-payment fraud has an impact on the profits in different ways like revenue loss, cost on staffing for manual review and administration of fraud claims. Merchants can take a total risk management pipeline view of operation and can gain efficiencies. The risk management pipeline view involves the following activities: Automated screening, Manual review, Order dispositioning and Fraud claim management.
Security in e-payment Process: Secured e-payment transaction system is critical to e-business. Without a secured payment transaction system, e-commerce will be a castle built in the sand. There are two commonly used secure e-payments Secured Socket Layer (SSL) and Secured Electronic Transaction (SET).
SSL is a secured connection for cyber shoppers to send payment information to e-tailor‟s web. The objective of SSL is to ensure confidentiality, by encrypting the data that moves the client and server computers when exchanging information. It also provides authentication by use of the RSA algorithm. SSL provides secured connections for payment for merchants and customers.
SET is a messaging protocol designed by VISA and MasterCard for securing credit card transactions over open networks. The main feature of SET protocol is that all sensitive information sent to all parties (customer, merchant and Bank) are encrypted, all three parties are required to authenticate with certificates from SET certificate authority and the merchant never sees the customer card number in plain text. SET ensures that the payment process is private, convenient and secured.
Awareness and Education: Awareness of security risks by merchants and consumers plays an important role in reducing fraud in e-payments . Merchant awareness and education is also important. They should be aware of the types of frauds, statistics and best practices. Consumer awareness and education is important in order to reduce Identity theft or payment data theft.
Network Analysis: the instant creation of graph networks showing the relationships between entities in a database. This is vital for investigations analysis. It also boosts ML predictive capabilities by analysing networks.
Account Takeover Defense: A combination of security checks, data analysis and detection that looks to secure the accounts against the constant breaching efforts of fraudsters.
Machine Learning: ML is automated and highly flexible to handle thousands of payments each second. A model is basically the equivalent of a team of analysts running hundreds of thousands of queries and comparing the outcomes to find the best result. With machine learning this is done in milliseconds with minimal human input.
Link Analysis Using Graph Networks: Link analysis is like a detective’s wall with suspects, dates and locations covered by criss-crossing strings connecting them. A graph network does a similar job – it allows you to look at all the evidence across all your customers and join the dots to build a picture of what a fraudster looks like, so you can prevent future fraudsters from making payments.
Protection from Internal Threats: Organizations should take measures to minimize internal tampering with the computer system. The Management should take precautionary measures which include monitoring the use of computers and networks by employees. The physical access to computer should be limited by use of passwords, magnetic card reader and biometrics to verify the identity of the user.
Conclusion
There will always be fraud!
Fraud prevention not only saves money but also costs money. In Fraud prevention organizations have to be highly cautious as false rejection of non-fraudulent transactions will cost the company. At times, in spite of using technology tools in detection of fraud, fraud prevention involves manual procession of the transaction. Different techniques may be needed for different kinds of fraud. The organization should formulate a successful strategy for detecting and preventing fraud and thereby reducing costs.