While digital payments are increasingly becoming the preferred method of payment for businesses, they also pose a number of security risks. Understanding the main risks can help you mitigate them and ensure that your customers’ data is secure.
One of the main risks associated with online payments is fraud. This can happen when a cardholder uses a stolen credit card or card details are hacked and used to make fraudulent purchases.
1. Fraudulent transactions
With so many consumers using electronic payments, fraudsters can take advantage. They can use stolen credit card information to make unauthorized purchases and even sell items they’ve purchased illegally to pay for their own transactions.
Payment fraud is the unauthorized use of a person’s credit or debit card data to make purchases over the internet or via telephone. It’s also a type of online identity theft and is a growing threat to businesses.
Fraudulent payment at point-of-sale (POS) – This type of scam happens when a fraudster convinces a clerk to manually key in the details of a credit or debit card they don’t have with them. This bypasses normal authentication checks and can result in chargebacks for breach of terms, which can cost merchants money.
As a result, PSPs are increasingly under regulatory pressure to counter financial crime. To do this, they need to rethink their approach. They need to develop a proportionate control framework, based on an appropriate risk-based approach that enables them to target high-risk transactions and customers.
2. Identity theft
Identity theft is when someone steals your personal information, like your name, social security number, credit card details, or health insurance details, to commit fraud. It can lead to financial losses, damage your credit and even emotional distress.
Criminals may gain access to your personal information through a data breach at a company or through stolen documents. They can use your personal information to open new accounts and to make fraudulent purchases with your debit or credit cards.
In many cases, they can do this without your knowledge and without you noticing the fraudulent charges. They may also try to use your personal information to file a false tax return or claim a refund from the IRS.
One of the biggest risks in online payments is identity theft. This type of crime is becoming more prevalent, with the amount of reported fraudulent activity increasing each year.
3. Account takeovers
Account takeover fraud is when criminals steal login credentials from legitimate customers to commit fraud. They may also steal information such as credit card numbers or social security numbers for use in fraudulent purchases or money transfers.
Fraudsters can steal accounts from a variety of different sources, including online hacking, email phishing, and identity theft. They can also gain access to customer accounts by stealing passwords from data breaches or purchasing them on the Dark Web.
These attacks can affect a business’s reputation and lead to increased chargebacks and customer transaction disputes. In addition, they can raise the cost of processing payments by millions.
To prevent account takeover fraud, financial institutions need continuous monitoring and machine learning to track all customer activity on their accounts. This allows them to spot patterns and clues that indicate that a customer is under attack before they transfer money out of their account.
4. Data breaches
Data breaches occur when hackers, employees or other third parties leak or lose sensitive information. They might be motivated by a desire to gain financial or commercial benefit from the data, revenge against the organization or a desire to sell it on the black market.
Malware is the most common cause of a data breach, but human error also plays a role. Companies that don’t keep their systems updated and implement security policies can be a big risk.
A data breach could cost your business money, as well as reputational damage and lost business. It could also result in legal and governmental fines.
If you discover a breach, it’s important to take immediate steps to protect sensitive data and minimize the damage. These include identifying a data forensics team, documenting lessons learned and consulting with legal counsel.