The payment landscape is undergoing rapid changes driven by the massive advancement in digital technology. Millennial consumers are also searching for on-demand payment and banking solutions.
Covid-19 has added further inertia into the demand for contactless and virtual payment means in the modern era of social distancing. But the rapid rise in popularity of the electronic payment system has also opened the floodgates for frauds and scams.
The best thing about electronic payment is that it allows instant fund transfer from one account to another. Mobile banking has been raising up the popularity ladder for quite some time but the number of new mobile banking registrations jumped up by 200% in April 2020. This data was published by Fidelity National Information Services (FIS) and it stands out as a direct result of the ongoing pandemic.
But such advancements come at the expense of digital thefts as your personal and financial data becomes accessible by malicious hackers especially while choosing unsecured digital payment gateways. Once the data is stolen, it gets sold in the market for perpetrating fraud and demanding ransoms from unsuspecting individuals or companies.
Barracuda, an IT security company has recently reported that data breaches and cyberspace security issues have been faced by 51% of Asia Pacific companies in the last few months. The percentage has been spiraling upwards since employees started working from home.
As the demand for digital payment systems is growing drastically, we also need to have a proper security framework in place. Otherwise, we might fall prey to the following types of risks on both individual and company level.
List Down the Risk Factors of Electronic Payment System
1. Internet Banking Fraud
Cybercriminals often use malware to attack computers in the modern era of increasing online reliance. The malware distribution methods are also getting more and more sophisticated with each passing day in the form of malicious USB, cloned advertising sites, phishing emails from unknown addresses, public unsecured Wi-Fi networks, and infected apps.
Sending malware embedded email is the most common form of banking fraud wherein a spoof communication mail is sent about the client’s bank account. On being downloaded, the malware can damage the system, steal confidential information and spy on operations.
2. Authorised Push Payment Fraud
This type of digital payment fraud has gained a lot of reputation lately. Here victims are manipulated for undertaking real-time payment into bank accounts which are operated by fraudsters. Business email compromise (BEC) is a prevalent form of authorized push payment fraud attacking businesses.
This looks similar to any other transaction request received by the firm on a daily basis. But it bypasses all security controls making it one of the most important online payment methods to avoid. Some common examples are a mail from the supplier requesting payment from any other bank account and extracting all the bank account credentials along the way.
3. Application Programming Interface (API) Fraud
Regulators can be seen granting digital banking licenses as a means of liberalizing the financial services sector. But this is making the banking data and electronic payment system open to third parties. While such initiatives are taken with a noble motive of acting as a bridge between banks and industries like fintech, telecom, e-commerce, it is ending up opening loopholes for fraudsters to exploit.
Under the open banking system, banks can share the data of account holders without seeking out their consent. This delegated data access is made possible through APIs which have also opened new opportunities for cybercriminals.
4. Mobile Banking Fraud
The number of new mobile banking registrations skyrocketed once COVID-19 took the shape of a global pandemic. More and more corporates subscribed to finance apps and e-payment solutions. But this also made them fall prey to mobile banking fraud attempts and malicious app installations.
Increasing demand for contactless means of payment amidst the pandemic has also led to a rhetoric rise in QR code scams. Under this mode of electronic payment system fraud, the scammers replace a fraudulent QR code in the place of the original. This lures users to download a malicious app or click on a fake website which ultimately ends up stealing sensitive data, money, or both.
Banking trojans usually come disguised as harmless apps like a weather app or maybe battery manager. They remain dormant post installation and strike a fatal blow once the users launch a banking app. The users remain oblivious about the breach as the trojan captures all the sensitive credentials.
While on the lookout for mobile banking apps, users often end up downloading the fake ones which look and feel authentic. This is another online payment method to avoid as it leads users to a phishing site and tricks them into entering their credentials.
5. Payment Conflicts
In the case of electronic payment systems, everything is handled automatically with next to none human intervention. This can create room for errors especially while dealing regularly with vast amounts of payments and multiple recipients. Technical glitches might lead to payment conflicts and thus you need to check the pay slip at the end of every pay period.
The ongoing pandemic has increased the propensity for digital payment fraud. Mobile banking is a delicate area that businesses simply cannot ignore. You can strengthen the security parameter of your company by making your employees understand the importance of cyber hygiene. For starters, you can keep your mobile OS updated and the computer protected by a strong firewall. Vulnerable applications should be blocked apart from placing a multi-factor authentication process in place. Being aware of the latest incidents of the digital payment world can also help you prepare in advance for the looming threats.
Debit or credit cards, mobile wallets, internet banking, Unified Payments Interface (UPI) service, digital payment apps, Bank prepaid cards, Unstructured Supplementary Service Data (USSD), mobile banking, etc.
Digital payments are safer and more convenient than traditional methods of cash payment.
It becomes difficult to attain requisite transparency while making cash payments as they are difficult to trace. But in the digital mode, payments can be tracked and this helps in reducing the risk of theft and corruption.
Cashless payments speed up the entire process while minimizing errors and omissions to a great extent.