By Lawrence Reaves, President and CEO at Advanced Fraud Solutions
The most wonderful time of the year is also the most dangerous for payments.
Fraudulent payments and payment scams typically soar during and after the holidays. That is because fraudsters spy opportunity – their victims are experiencing holiday-related stress; some are desperate for new ways to make money or to find too good to be true holiday deals; and there’s also a better chance that fraudulent transactions can fly under the radar as spending (legitimate and fraudulent) increases.
This year is likely to be especially fraught as consumers increasingly rely on digital payments for everyday transactions. And with the pandemic, along with its frightening new variants, fraudsters are finding it easier to socially engineer their victims – who are at home, stuck to their device – into giving away personal and payment information.
Fraud risks of online shopping
The risks of online shopping from this holiday season, for example, recently pushed the FBI to issue a warning. In the PSA, the FBI covers two of the most common holiday shopping scams, including non-delivery and non-payment crimes:
- In a non-delivery scam, a buyer pays for goods or services they find online, but those items are never received. Conversely, a non-payment scam involves goods or services being shipped, but the seller is never paid.
- According to the Internet Crime Complaint Center’s (IC3) 2020 report, non-payment or non-delivery scams cost people more than $265 million. Credit card fraud accounted for another $129 million in losses.
The FBI also cites the large volume of complaints it receives in the first months of the year, noting a “correlation with the previous holiday season’s shopping scams.”
While fraud’s target is usually the consumer, it’s financial institutions who nonetheless feel the impact downstream.
Financial institutions that don’t do enough to prevent payments fraud and educate their account holders now are likely to experience financial loss and dissatisfied constituents.
For FIs, ways to mitigate payments fraud
To mitigate fraud on the FI side, an advanced payments fraud detection system is needed. Being proactively – specifically by triangulating payments and deposits against a large, continually updated database before a transaction is completed – is a must. Financial institutions also need to band together – taking a neighborhood watch approach – and cooperatively share fraud data so that others don’t get scammed. (What is good for the goose is good for the gander.)
Finally, educating consumers about their digital hygiene, what suspicious emails and websites look like, and raising awareness about the dangers and fraud schemes currently being deployed, will serve financial institutions (and their customers) well.
Doing so will mean more joy for your account holders, and less of a hangover for you.
To learn more about Advanced Fraud Solutions’ payment fraud detection tools, click here.