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A Payments Fraud Primer

February 24, 2017


Since the earliest days of commerce there has been payments fraud. Hollywood has formed many of our views of how fraud takes place. Whether it’s the bazaar vendor biting on a coin to insure it is gold, a crime boss printing fake $20 bills or Leonardo DiCaprio’s portrayal of Frank Agagnale’s counterfeit check scheme, we all have been exposed to payment fraud as an exciting plot element. However, in real life payments fraud costs businesses billions and those costs are ultimately passed to consumers. Not very entertaining, is it?


Where does Payments Fraud Occur?


The majority of fraud still happens at retail. There has been a lot of fanfare and confusion over the introduction of EMV to address fraud at POS. The EMV standard has proven to solve the in-store Point of Sale data theft problem in Europe and a version is now rolling out in the US. There have been check guarantee solutions the mitigate risk for years and new anti-counterfeiting paper has reduced fake currency.  


However, fraud is like water, it seeks the path of least resistance. E-commerce, online and mobile transactions are growing exponentially. And solutions that work at retail don’t always translate in this virtual environment.  The bad guys will now focus their efforts on data streams traveling from shoppers to on-line stores, and from those stores to payment providers. In countries where EMV has been adopted we see the rise of online fraud and that is a trend that is repeating itself in the US.  With that being the case, every executive needs a crash course in the types of fraud their risk and fraud teams are fighting every day.


Types of Payments Fraud


  • Identity theft: With the barrage of TV commercials you would think that everyone in America has had their identity stolen. It is not that dire, but it is a real risk that we all face. Identity theft is a common type of fraud online. A cybercriminal steals personal information and uses it under false pretense. Hackers penetrate firewalls of old security systems or hijacking login credentials via public Wi-Fi.

  • Phishing: The 2016 Presidential campaign ensured that every American is aware of this term. And every IT department is constantly sending out reminders to watch for these attempts. But this fraud technique is still very successful for fraudsters Any emails or websites that require personal or private information such as credit card, bank account or login credentials are prone to phishing. The email or link may appear to be valid, but if you don’t take the time to check, you are handing them the keys to the kingdom.

  • Wire transfer scams: Fraudsters have taken advantage of customer’s greed, fear and empa