Account Takeovers And More P2P Payment Fraud On The Rise

May 19, 2020

Chargeback insurance and other fraud prevention strategies will be needed both now and the future.

The launch of the online marketplace has opened up a new realm of possibilities for both companies and customers.  According to Statista, the “transaction value” of digital payments is expected to top $4.8 billion in 2020. E-Commerce makes up the largest portion of the segment. Although this is good news for the industry, on the flip side, there are menacing opponents keen on shattering this good fortune.

As companies gather an endless amount of online consumer data to complete these online transactions, risk is always a potential threat. 

Shockingly, an immense number of “customers’ personally identifiable information (PII)” is frequently available for purchase on the Dark Web.  Last year, TechCrunch reported that a hacker first stole nearly 620 million “user records” from a total of 16 websites and then stole another 127 million from an additional 8 websites. These accounts were later sold, “in bitcoin prices”,  on a platform called Dream Market 

Although no financial information was included in the virtual heist, the information did include names, email addresses, some login and account data, and passwords that were scrambled.

More Losses Due To Identify Fraud

Javelin, a research-based advisory company, conducted a newly-released 2020 Identity Fraud Study and found that the losses due to identity fraud increased 13% to $16.9 billion. It also discovered that “person-to-person” payments fraud rose by 733% from the years 2016 to 2019. 

Although the study indicated that there was a drop to 5.1% of consumers falling victim of ID fraud last year versus 5.7% in 2018, there was an increase in losses. In 2019, the “total dollar losses” increased $2.2 billion from $14.7 billion, the year prior. 

The reason for the substantial losses is directly attributed to the fraudsters’ change in tactics.  No longer are they targeting “payment card fraud” but have set their sights on  “online account takeovers”.  This fraudulent strategy involves creating new accounts with the use of stolen customer information. 

The growing use of P2P or Person-to-Person payments has also exposed consumers to a surge in fraud. Between 2016 and 2019, an increase of fraud of 722% was experienced by customers. These increases were attributed to the use of the following services, such as PayPal’s Venmo, Square’s Cash App, Apple Pay Cash, and bank-sponsored Zelle. One of the many issues of using these technologies is that, once the funds have been sent, there is no way to recover or dispute them.

In addition, account takeovers can also facilitate the use of P2P. Since criminals are able to bypass any authentication requirements, they are free to start sending money that cannot be recovered. 

What Steps Can Companies And Customers Take To Mitigate Fraud? 

Compromised account information is routinely used for “social engineering attacks”. In this case, the hacker pressures a customer service representative to provide access to customer accounts.  For this reason, both prevention software and fraud detection must be implemented to assess risk and to alert of any “counterfeit authorization attempts.”

Companies offering any type of promotional offers and loyalty benefits must use “real-time verification” for any requests in order to sidestep the increasing levels of e-commerce fraud.

Customers need to be educated about generating passwords and online safety. Consumers should change their passwords monthly and check their bank statements regularly. Credit and transaction monitoring services and “identity verification services”, can be used to alert customers of any suspicious account activity. 

A Growing Problem

Regardless of the current measures taken by companies to mitigate fraud, the gap between the severity of threats and the efficacy of the restorative measures taken is widening. 

Technology needs to continue to evolve and improve to stay ahead of fraudsters, while customers will need to be willing to embrace this technology to eradicate this growing problem.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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