Fraud has been around since the first shady merchant tried to pass off a sack of rocks as a bag of gold. That’s not likely to happen nowadays since we mostly live in the digital age, but just like society, scams have evolved.
Now you have to worry about phishing emails, credit card cloning, and coupon abuse, just to name a few. The best thing you can do as a business owner is keep abreast of whatever new scam is going around and arm your company against it.
So here’s a list of the latest tactics in fraudsters and how to protect yourself and your company.
A look at what the data says
Scammers are now armed with AI, deepfake technology, and an alarming knack for trickery that makes old-school cons look like child’s play. Out of all the cons, the one most used last year was a refund/policy abuse, with 48% of online merchants worldwide experiencing it. Friendly fraud affected another 45% of merchants.
These two scams are a bit difficult to manage because they happened after the purchase, so can not be stopped in real-time. Among those most experienced are also phishing (42%), card testing (38%), identity theft (36%), and coupon discount fraud (34%).
Payment fraud is costly but preventable
As simple as it is named, payment forgery happens when someone tricks a person or corporation into making an unauthorized expense. Scammers want money and they have a couple of cards down their sleeves.
Some types of payment fraud
- Credit card fraud–unauthorized use of stolen or fake credit card details for transactions
- Friendly fraud or chargeback fraud–a customer makes a legitimate purchase but later disputes the charge to get a refund while keeping the goods
- Card not present (CNP)–scammers use stolen card details for online or phone transactions where physical cards aren’t needed
- Account takeover–criminals gain access to a user’s account and make unauthorized transactions or withdrawals
- Identity theft–fraudsters steal personal information to open accounts, make purchases, or take loans
- Skimming and card cloning–criminals use devices to steal card data from ATMs or payment terminals and create counterfeit cards
How to prevent payment scams?
To defend yourself, you can invest in scam detection software that uses machine learning to identify suspicious transactions. Using fraud prevention software for ecommerce, is great when it comes to mitigating risks of chargebacks and other types of fraud. Softwares like this usually run in the background as customers visit your online store, create accounts, log in, browse products, make purchases, and so on.
When it comes to online purchases, you can require CVV codes, 3D secure authentication, and address verification. You can also educate your customers on secure payment practices, because an informed customer is less likely to fall for scams. This tells them you look after their well-being and helps build a trusted relationship.
AI-powered fraud has become more prevalent
Most of us have gone through tons of email phishing training, to notice suspicious mail as we open it, but things have evolved. AI can now generate voices and videos, which helps scammers impersonate CEOs, employees, or even customers with eerie accuracy. Can you imagine what it would be like to get a call from your boss telling you to transfer funds immediately? Only to find out the imposter wasn’t your superior at all, and now you’ve lost company money?! That’s not paranoia–that’s our new reality.
What does this mean for your business?
It’s important to train your workers to be skeptical of video and voice messages, even if they seem to be from a trusted source. Since deepfake can mimic a voice, but it can’t steal your fingerprints, it might be a smart idea to implement multi-factor authentication for financial transactions, just to be on the safe side.
Also, when it comes to educating your staff, don’t forget to keep them updated on the latest AI scams. Prevention is better than cure, and staying ahead of the dangers can save you money in the long run.
Account takeover attacks (ATO) are getting smarter
Do you remember what a nuisance it was when hackers used to steal your passwords? Well, they aren’t doing only that anymore–they’re taking over entire accounts and making themselves comfortable. How? Apparently, there’s a technique called credential stuffing, where they use leaked login details from one site to access others.
What can you do to make your company more secure? We can’t stress this enough, but do try to enforce strong passwords. If you have a creative blockage, there are password managers, and they should be able to help you not forget your strong and letters-caps-numbers-and-symbols passwords.
Another important step is to enable two-factor authentication (2FA) across all systems. And look out for unusual login activity. If Bob from accounting suddenly logs in from Kazakhstan at 3 am, something’s up.
Business email compromise (BEC) is costing companies billions
We’re all familiar with phishing emails from a ‘Nigerian prince.’ They’re old news now, but once they were a big deal. Business email compromise (BEC) is something very different. This is when fraudsters impersonate executives, suppliers, or clients to trick employees into wiring money or sharing sensitive data.
It’s one of the most financially devastating scams out there. For instance, BEC attacks are 42% higher in 2024 compared to the same period in 2023. Out of all email attacks, BECs hold a record of 21% (up from 15% in 2023).
What can you do to defend your enterprise from these clever emails? Call the person asking you to transfer money to verify the request, and make sure to use their private or known number and not the one in the email. Familiarize your team with how to recognize red flags like urgency, odd phrasing, and last-minute payment changes.
Synthetic identity is a new deceptive scheme
Creativity is the root of humanity, and fraudsters are creative too. They no longer steal real identities, but piece together fake ones using stolen social security numbers, fake names, and fabricated credit histories. With these manufactured profiles, they can open bank accounts, take out loans, and vanish before anyone’s the wiser.
How do you prune out synthetic customers? You can use advanced identity verification tools that analyze biometric data, behavioral patterns, and device fingerprints. These tools can flag inconsistencies in customer profiles, like an applicant with no digital footprint suddenly applying for a high-limit credit card. Also, it might be nice to partner with financial institutions to stay ahead of emerging identity-stealing tactics. You never know what new creative ideas fraudsters have up their sleeves.
Supply chain might be your weakest link when it comes to fraud
If your business relies on suppliers, manufacturers, or third-party vendors, you have another risk to worry about. When fraudsters infiltrate supply chains, they can create fake invoices, redirect shipments, or even introduce counterfeit products into your inventory.
To mitigate this, you should vet your suppliers carefully and conduct regular audits. You can use blockchain or other transparency tools to track shipments and stop tampering. And last but not least, be sure to implement strict vendor payment processes to avoid fraudulent invoices.
Insider threats are a growing concern
Not all frauds come from shadowy hackers in dark rooms–sometimes, it is Bob from accounting. Insider threats could be due to negligence or intentional, and they still account for a significant chunk of fraud cases. Employees with access to sensitive data can leak information, enable cyberattacks, or embezzle funds.
In this case, it’s customary to limit access to sensitive data on a need-to-know basis. Conducting background checks on workers who would handle finances or customer data is a new normal, especially during the process of applying for that kind of work. And don’t fear to report suspicious activity.
As a matter of fact, you can encourage a culture of reporting to make it easy for staff to report suspicious activity without fear of retaliation.
Social engineering scams can be hard to spot
Even the best and newest cybersecurity in the world can’t protect your business against human errors. Social engineering scams usually manipulate employees into handing over passwords, clicking malicious links, or transferring funds. This is the classic ‘IT support’ scam where a scammer says they’re tech support and tricks you into giving remote access. It’s more common than you think, almost as ‘The girl with a dog’ was common.
Luckily, all it takes to defend yourself and your organization from these forms of attacks is to educate your people. Run some tests and simulations to show them what phishing attacks look like. Have a strict verification process for handling sensitive requests, and create a ‘trust but verify’ mentality. You can never be too sure, and it’s always better to be on the safe side. If something feels off, the chances are it probably is.
Stay one step ahead of fraudsters
Fraud is like a game of whack-a-mole. Just when you think you’ve beaten one scheme, another pops up. The good news? You can stay informed and proactive. So, invest in strong security, educate your employees, and try to be more creative than fraudsters.
Well, sometimes you can’t be creative, some days are better than others, but you still have software and tools to help you. With the proper measures, everything will be alright.
