Category: Online Fraud

AI

AI In Payment Processing And Fraud Detection

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The integration of artificial intelligence (AI) into payment processing and fraud detection has changed the way financial transactions are conducted and secured. The rise of e-commerce and digital payments has created the need for payment processing even more secure and effective. AI has emerged as a powerful tool to address this challenge. In this article, we will discuss the use of AI in payment processing and fraud detection.

Payment Processing

AI technology has played a key role in streamlining payment processing, reducing transaction time, and increasing efficiency. This allows companies to manage large projects in real-time. An AI-based payment processing system can analyze customer data, identify patterns, and predict customer behavior to deliver a seamless and personalized payment experience.

One of the critical benefits of AI-powered payment processing is its ability to reduce payment errors. Traditional payment processing systems often experience errors due to incorrect data entry, miscommunication, or other human errors. AI can reduce these errors by automating the entire payment process. AI algorithms can detect and fix payment errors before they occur, saving businesses time and money.

Another benefit of AI-based payment processing is fraud detection. AI algorithms can analyze transaction data in real-time to identify suspicious transactions, reducing the risk of fraudulent activities. AI is also capable of finding unusual spending and blocking unusual transactions.

Fraud Detection

AI-based fraud detection systems have been developed in order to detect and prevent fraudulent activities. Fraudulent activity is a serious problem in the economy and can have serious consequences for businesses and consumers alike. 

AI algorithms can analyze large amounts of data in real-time, including transaction history, spending habits, and user behavior to identify potential fraud AI can identify anomalies and patterns it is unusual enough to indicate fraudulent activity. This information can be used to flag transactions that require further investigation to prevent fraudulent activity.

AI-based fraud detection systems can also learn and adapt to new threats, making them more effective. As fraud becomes more sophisticated, new AI algorithms can be developed to identify new threats and prevent them from being harmed.

One of the most important benefits of AI-based fraud detection is speed. Traditional fraud detection methods often take too long to detect and respond to fraudulent activity, giving fraudsters plenty of time to wreak havoc. AI can analyze data in real-time, enabling companies to react quickly to potential threats and prevent financial loss.
Conclusion

The addition of AI to payment processing and fraud detection has transformed the financial industry. The use of AI in payment processing systems has enabled businesses to process large transactions in real time, reducing payment errors and providing customers with a seamless payment experience
AI-based fraud detection has made it possible to identify and prevent fraudulent transactions before they cause harm, reducing the risk of financial loss As the financial industry continues to evolve with payment processing and fraud in discovery, the application can be extensively extended, helping businesses operate more efficiently and safely

How Payment Gateway Reduces Frauds and Chargebacks?

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With the rise of e-commerce and online transactions, the need for secure and reliable payment methods has become more critical than ever before. Payment gateways are the backbone of online transactions, ensuring that customers’ transactions are secure and merchants receive their payments. However, the increased volume of online transactions has also led to a rise in fraudulent activities and chargebacks, which can have a significant impact on merchants’ revenue and reputation. In this article, we will discuss the role of payment gateways in reducing fraud and chargebacks.

What is a Payment Gateway?

A payment gateway is a service that facilitates the transfer of funds between customers and merchants securely processing credit cards, debit cards, and other forms of electronic payments. Payment gateways act as intermediaries between the customer and the merchant’s bank, ensuring that transactions are processed securely and efficiently.

How Payment Gateways Reduce Fraud:

Payment gateways play a vital role in reducing fraudulent activities in online transactions. Fraudulent transactions can result in significant losses for merchants and can negatively impact their reputations. Payment gateways use various techniques to detect and prevent fraudulent transactions.

Here are some ways payment gateways reduce fraud:

Two-Factor Authentication:

Two-factor authentication (2FA) is a security measure that adds an extra layer of protection to online transactions. With 2FA, customers are required to provide two pieces of information to authenticate their identity. Payment gateways use 2FA to ensure that only authorized users are conducting transactions.

Real-Time Fraud Detection:

Payment gateways use real-time fraud detection systems to monitor transactions for suspicious activity. These systems analyze various data points, including the customer’s location, device information, and transaction history, to detect fraud. If a transaction is flagged as suspicious, the payment gateway can take immediate action to prevent the transaction from being processed.

Address Verification System (AVS):

Address Verification System (AVS) is a security feature that verifies the billing address provided by the customer with the address on file with the credit card company. Payment gateways use AVS to ensure that the customer is a legitimate cardholder and prevent fraudsters from using stolen credit cards.

Card Verification Value (CVV):

Card Verification Value (CVV) is a three-digit security code printed on the back of credit cards. Payment gateways require customers to provide the CVV code during transactions to ensure that the customer has the physical card and is not using stolen card information.

Risk Scoring:

Payment gateways use risk scoring to evaluate the risk associated with each transaction. Risk scoring takes into account various factors, such as the customer’s transaction history, device information, and location, to assign a risk score to the transaction. If a transaction is deemed high-risk, the payment gateway can take additional measures to prevent fraud.

How Payment Gateways Reduce Chargebacks:

Chargebacks occur when customers dispute a transaction and request a refund from their bank or credit card company. Chargebacks can result in significant losses for merchants, as they not only lose the revenue from the transaction but may also incur chargeback fees and damage to their reputation. Payment gateways use various techniques to prevent chargebacks.

Here are some ways payment gateways reduce chargebacks:

Chargeback Prevention Tools:

Payment gateways provide merchants with chargeback prevention tools to minimize the risk of chargebacks. These tools include fraud detection systems, dispute resolution processes, and chargeback alerts. Merchants can use these tools to identify and resolve disputes before they escalate into chargebacks.

Chargeback Representment:

Chargeback representment is the process of disputing a chargeback with the customer’s bank or credit card company. Payment gateways offer chargeback representment services to merchants, which involve gathering evidence to prove that the transaction was legitimate and providing it to the customer’s bank or credit

card company. If the evidence is convincing, the chargeback may be reversed, and the merchant can receive the funds for the transaction.

Fraud Monitoring:

Fraud monitoring is the process of continuously monitoring transactions for fraudulent activity. Payment gateways use fraud monitoring to identify transactions that are likely to result in chargebacks. If a transaction is flagged as high-risk, the payment gateway can take immediate action to prevent the transaction from being processed, reducing the risk of chargebacks.

Chargeback Alerts:

Payment gateways provide chargeback alerts to merchants, which notify them when a customer initiates a chargeback. Merchants can use these alerts to take immediate action to resolve the dispute before it escalates into a chargeback. By resolving disputes early, merchants can minimize the risk of chargebacks and maintain their revenue.

Conclusion:

In conclusion, payment gateways play a crucial role in reducing fraud and chargebacks in online transactions. With the increase in e-commerce and online transactions, payment gateways have become essential to ensure the security and reliability of online payments. Payment gateways use various techniques, including two-factor authentication, real-time fraud detection, AVS, CVV, and risk scoring, to detect and prevent fraudulent transactions. They also provide merchants with chargeback prevention tools, chargeback representment services, fraud monitoring, and chargeback alerts to minimize the risk of chargebacks. By using payment gateways, merchants can maintain their revenue and reputation while ensuring the security and reliability of their online transactions.

Online Payment Fraud in India – How is the Youth Affected

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Online Payment have taken the market by storm. The positives of digital payment have compelled most businesses to add this method as a mode of payment. Doesn’t everything sound too good to be true? Well, digital payments have downsides to it too, and with more and more people becoming aware of the risks of data breaches, banks, and payment gateways are finding better ways to secure customer data.


Studies suggest that there is a strong correlation between the rise in the adoption of mobile applications, and online payments and an increase in financial fraud. As per a global survey conducted by FIS in 2019, statistics state that Indians are amongst the most frequent victims of online banking frauds so much so that the rate has doubled to 37% this year against 18% last year.

The rapid pace of digitization has created a competitive situation in the market wherein banks and payment wallets have developed apps for customers along with websites to complete quick and hassle-free transactions. Yet, around 96% of people who chose mobile apps over traditional modes of payment were affected by online payment fraud.
As per the data released by RBI for the financial year 2017-18, banks lost around Rs 32,000 crores of public money to online payment fraud. This showed a three-fold rise in digital scams in the last 5 years.


Let’s dive a little deeper into the different types of payment fraud and what steps have been taken by financial institutes to curb the repetition of such cases.


What are the common types of online payment fraud?

Online payment
Even after banks repeatedly send out notices and warnings about the types of payment frauds and how to be wary of them, hackers find a way to pose as authorized personnel to commit the crime. The most common types of payment fraud in India are:

Phishing:

Phishing is the process of accessing the target’s personal information and financial credentials through e-mails, text messages, or over calls. This sensitive information obtained by hackers is then used by them to their benefit.
Friendly Fraud:

Also known as a Chargeback Fraud, Friendly Fraud is when a customer (fraudster) completes the payment process with his own credit card. On receiving the goods or service, he then requests the issuing bank for a chargeback stating that his card was lost.
Unsafe apps and websites:

While casually browsing on the internet, we come across a number of pop-ups and are rerouted to unknown websites or app links that turn out to be fraudulent. People who are unaware of the pitfalls of such scenarios tend to give away sensitive information that is later misused against them.

Why is there a rise in online payment fraud in India?

After businesses bore the blow of demonetization, close to 1/3rd of India’s population resorted to online payment systems. It then became fairly easy for hackers to obtain confidential data. Some of the reason why there was a hike in the rate of fraud is:


• Lack of prosecution for such crimes.
• Low priority of digital payment frauds.
• Frequent calls from people pretending to be from banks and asking you for your personal details.
• Difficulty in nabbing the fraudster due to fake accounts created by him.

To know what is online fraud and how to prevent it click here.


Who is affected the most by online payment fraud?

A number of factors drove the younger generation to move to online modes of payment from their traditional counterparts. Low cost of mobile data connectivity, user-friendly interface of apps and websites, and convenience on-the-go form the top three tiers that contribute to the growth of digital payments. The age group of 18-37 is the prime audience that is affected by such online frauds as they are the working class and it is convenient for them to make transactions while traveling because of their busy schedules.


How are payment gateways securing customer data and preventing online fraud?

Since a large chunk of people is opting for payment gateway integrations, it goes without saying that data security becomes a major concern. Many steps are taken by such gateways to ensure the customer’s information is safe and secure. Some of the basic but important methods of securing data are:


• SSL Protocol
• PCI DSS Compliance
• Tokenization
• Encryption of data

Such steps create a sense of security in the minds of the customers so they complete transactions without giving it a second thought.

We, at Digital Payment Guru, partner with payment gateways that are leading in the market. We understand your concern about online payment fraud and ensure all transactions are secured under PCI DSS Level 1 compliant technology and fraud scrub. This allows customers to go ahead and make payments without worrying about the threats of data leaks. Head on to Digital Payment Guru to know more!

 

What Is Online Fraud And How To Prevent It?

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Have you shopped online? Online fraud is what you can come across if not aware, Online fraud is false deception intentionally made for financial gains. Online frauds are of different types:

  • Online Spoofing
  • Online Phishing.
  • Triangulation fraud.
  • Data Theft
  • Chargeback fraud.

Online Spoofing:

Spoofing is the creation of spam emails that look genuine and trick businesses to take action. No one would knowingly download a Trojan package into the system unless provoked to do it by putting fake popups on security threats for the system. How it’s done? Well, genuine-looking mail is created with corporate graphics of reputed service providers which will guide you on how to protect your business. This professional graphic makes the mail look genuine and tricks businesses to click on the link in the mail. This link executes malicious software which harms the operating system and critical files, it expands through the network and affects clients as well.

spoofing

How to prevent Spoofing?

-When you receive such suspicious emails best thing to do is hover over the senders’ address, hackers have a domain name that is very much similar to legitimate domain names, so check for spelling mistakes.

-Legitimate institute never sends an attachment like .exe, .bat, or zip, check if the email has an attachment. Red flag the mail and do not follow any instructions written in the mail.

Online Phishing:

Phishing is a form of Spoofing but unlike Spoofing where attackers tend to break into the system and fetch information, Phishing is tricking the end-user to reveal sensitive information wherein a genuine-looking message is forwarded to the end-user which consists of a fake website link. This link redirects the end user to a bogus website that asks for sensitive account-related information. Revealing this information can harm your financial assets.

How to prevent Phishing?

-There is no problem in clicking on the links when you are on a trusted site, but when it comes to clicking on the links within the email or message you need to be 100% sure as these links can be spam links. Before clicking on such a link hover over the email and check if the links direct to what it actually shows. Do not fill in any personal data on such sites as it can be a lure to steal your data.

-Install Anti Phishing tools on a browser as these tools scan the entire websites and check with a list of phishing sites. If you visit any malicious sites the tool prompts immediately, do not visit the site.

Triangulation fraud:

Triangular fraud as the name suggests involvement of three people,

  1. Customer who places an order.
  2. Fraud seller.
  3. Genuine E-commerce site.

triangulation fraud

How fraud is done? A legitimate-looking website is made by a fraud seller who displays some items at very low prices, which makes the customers buy the products. The customer is unaware of the fraud happening and places an order on this fake website. The fraud seller has stolen credit card information which he uses to make the purchase of those products for which an order has been placed on his fake website. He purchases these products from a genuine website. The customer receives all the updates with the respective product from the seller. The seller sends these updates from a genuine site to the customer.

Who is the criminal? The seller with a stolen credit card is the criminal.

Victims? Well, there are two victims, the customer, If the fraud is discovered, the genuine website will contact the customer to return the stolen products.

and the person whose credit card details were used for transactions is a victim as he is unaware of those transactions.

How to prevent Triangulation fraud?

-Speak with the customer who doubts suspect triangulation fraud, and gather as much information as possible about the seller to determine the fake website.

-Focus on the products as the seller has some list of common products which sell very frequently, this can help to analyze the pattern of fraud.

Chargeback fraud:

Chargeback is the term used for an order from a bank to a business to return the amount paid for a fraudulent purchase. How is a chargeback fraud done? The customer makes a payment through a payment gateway for certain goods or services, later on, he/she claims that the purchase was made fraudulently or makes a false request that the goods were not delivered and claims for a chargeback. When a transaction seems legitimate then chargeback is the only way to get the money back.

How to prevent Chargeback Fraud?

The customer claims a chargeback for many reasons so the first step will be to identify the reason for a chargeback. Sometimes the customer can claim a chargeback if the description doesn’t go with the product when delivered. So work on the description to avoid a chargeback.

-Use delivery confirmation to ensure that the product has been delivered to the customer, at times it happens that a customer is not at home and the package is left on the porch which can be stolen, so for you, the item is delivered but the customer did not receive the product for which chargeback can be claimed.