Blogs/Fraud Risk

Rapid rise in digital transformation: A red carpet to digital fraud


Committing fraud in the Digital World is easier than in the physical world, because of lesser footprints and rougher traceability. Data gets spread more easily here than we imagine. Considering lost card data, by the time the customer blocks the card, the details will be used in 5 different eCommerce websites at the same time from different regions to complete certain transactions. Is that all?

This blog is about, What if? There were no Fraud Risk Management solutions. How will it affect the financial sector? explained in different scenarios with different types of fraud activities that can take place if there is NO Fraud Risk Solution.

1. Online Fraud

According to a study conducted by Experian, More than 90% of payments by consumers are made online, for goods/service trade. And it’s obvious that this upsurge in online transactions will charm the fraudsters.

For Instance, Consider that you have shared your card details with your friend, which includes your card number, expiry date, and CVV via an image or text to their mobile phone. So the confidential data is public now and let’s take a look at how your data can be used, Probably for the first transaction there will be no verification and the transaction will be smooth. But for the following frequent domestic transactions, an OTP verification will be required, but the concept will be different for international transactions which will continue without any hindrance.

The above scenario is an example of identity fraud. Instead of creating a new identity, fraudsters simply steal someone’s data and pose as that person for purchases and transactions.

2. Card Fraud

Any type of fraud that involves payment cards comes under this category. An example of this fraud is hacking your card by installing a small skimming device to PoS ( Point of scale) and collecting your data while you complete the transaction. In some cases, a merchant/ store employee will be involved in this scam who provides information for fraudsters. By setting up a camera to spy your pin or by a duplicate keypad the scams are performed.

3. Application Fraud

Application fraud is when an account is opened with someone else’s details or counterfeit documents to perform online transactions and purchases. In some cases, scammers use their own identity to apply for a credit card, with fake payslips and similar documents with no intention of paying back. This type of fraud is also referred to as “Social Engineering” and it is challenging to spot.

4. Merchant Fraud

In this type of fraud, merchants use their Point-of-Sale (PoS) devices to transfer money from credit card to bank account for their own purposes. This can happen as a service also, where the merchant might take a percentage as commission for converting credit card amount to cash in hand.

5. Friendly Fraud

Friendly fraud ensues when a customer initiates a false chargeback after purchasing a product/service and claiming that they never received it/ missing the product. Basically what they do is contact the bank to dispute the charge.

There are many reasons why customers decide that disputing the transaction with their bank will be more successful than having that conversation with the merchant directly. Most of the time, they will get a win out of this.

Conclusion This doesn’t stop here. Money Laundering, Frauds in Domestic Money Transfer, Net Banking, UPI, Wallet, and the list goes on. The only way to avoid or stabilize these frauds is by tracking the digital fingerprint, analyzing the pattern, and composing the user profile. This is what a Fraud Risk Management tool/solution provides.

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