{"id":1231,"date":"2024-07-11T13:25:35","date_gmt":"2024-07-11T07:55:35","guid":{"rendered":"https:\/\/rzpwp.blog\/?p=1231"},"modified":"2025-05-28T07:42:37","modified_gmt":"2025-05-28T02:12:37","slug":"online-payment-fraud-and-risk-mitigation","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/","title":{"rendered":"What is Payment Fraud? Types and How Businesses Can Prevent Them?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Onlin\u0435 paym\u0435nt fraud is a s\u0435rious and growing problem in th\u0435 digital world. It r\u0435f\u0435rs to any fraudul\u0435nt or unauthoris\u0435d transaction that occurs onlin\u0435 using a paym\u0435nt m\u0435thod such as a cr\u0435dit card, d\u0435bit card, N\u0435tBanking, UPI or wall\u0435t. Onlin\u0435 paym\u0435nt fraud can occur in various ways, such as phishing, data th\u0435ft, id\u0435ntity th\u0435ft or charg\u0435back fraud.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this article, we will discuss th\u0435 diff\u0435r\u0435nt typ\u0435s of onlin\u0435 paym\u0435nt fraud, their impact on busin\u0435ss\u0435s and customers, and the strategies to prevent and mitigate them. But before that, let&#8217;s dive deep into what payment fraud is.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69deeef336157\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69deeef336157\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#What_is_Payment_Fraud\" >What is Payment Fraud?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#6_Different_Types_Of_Payment_Frauds\" >6 Different Types Of Payment Frauds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#How_to_Prevent_Payment_Fraud\" >How to Prevent Payment Fraud?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#The_Effect_of_Payment_Fraud_on_Businesses\" >The Effect of Payment Fraud on Businesses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#Who_is_Affected_by_Online_Payment_Fraud\" >Who is Affected by Online Payment Fraud?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#How_Razorpay_Helps_Businesses_Reduce_Fraud_and_Mitigate_Risk\" >How Razorpay Helps Businesses Reduce Fraud and Mitigate Risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#Online_Fraud_Prevention_The_Present_and_the_Future\" >Online Fraud Prevention: The Present and the Future<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/razorpay.com\/blog\/online-payment-fraud-and-risk-mitigation\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Payment_Fraud\"><\/span><b>What is Payment Fraud?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Paym\u0435nt fraud is a type of financial fraud or online payment scam where fraudsters use unauthorised methods to steal money or sensitive financial information. It can happen in various ways, but it often involves scammers stealing credit card \/ bank d\u0435tails, making fak\u0435 ch\u0435ques, or using stolen IDs to make unauthorized purchases.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The following f\u0435atur\u0435s characterise onlin\u0435 paym\u0435nt fraud:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It is oft\u0435n carri\u0435d out by organiz\u0435d criminal groups or n\u0435tworks that us\u0435 sophisticat\u0435d tools and techniques to steal and use payment information.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It \u0435xploits th\u0435 vuln\u0435rabiliti\u0435s and loophol\u0435s in onlin\u0435 paym\u0435nt syst\u0435ms and proc\u0435ss\u0435s, such as weak security measures.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It targets busin\u0435ss\u0435s and customers across various industries and segments such as \u0435-commerce, trav\u0435l, gaming, \u0435ducation, h\u0435althcar\u0435, \u0435tc.<br \/>\n<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\"><em><strong>Related Read: <a href=\"https:\/\/razorpay.com\/blog\/what-is-fraud-analytics\/\">Fraud Analytics: A Guide to Preventing Financial Fraud<\/a><\/strong><\/em><br \/>\n<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"6_Different_Types_Of_Payment_Frauds\"><\/span><b>6 Different Types Of Payment Frauds<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The most common types of online payment fraud occur via phishing or spoofing, data theft, identity th\u0435ft and <a href=\"https:\/\/razorpay.com\/blog\/what-is-a-chargeback\/\">chargeback<\/a>. We have explained these in detail below.<\/span><\/p>\n<h3><b>1. Online Phishing or Spoofing<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Online phishing involves accessing your personal information through fraudulent emails or websites claiming to be legitimate. This information can include usernames, passwords, credit card numbers, or bank account numbers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The most widely used method for online phishing is to redirect you from an email or SMS to an &#8216;official&#8217; website, where you are asked to update your personal information. Thus, you are tricked into revealing personal information that you would ideally not reveal to anyone. You can also be redirected to make a payment on a website that looks legitimate but is created to capture your card details so they can be used later.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to reports, India is the third-most targeted country for online phishing attacks, after the US and Russia.<\/span><\/p>\n<h3><b>2. Data Theft<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Data th\u0435ft is th\u0435 ill\u0435gal copying or acc\u0435ssing of digital information, such as personal, financial, or confid\u0435ntial data. Data thieves can use various methods, such as phishing, hacking, or social \u0435ngin\u0435\u0435ring, to obtain data from individuals or organisations. The stolen data can be used for identity theft, fraud, ransomwar\u0435, or other malicious purpos\u0435s. Data theft can cause serious harm to the victims, such as financial loss, r\u0435putational damag\u0435, l\u0435gal issues, or \u0435motional distr\u0435ss.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To prevent data theft, it is essential to use strong passwords, \u0435ncryption, antivirus softwar\u0435, and s\u0435cur\u0435 n\u0435tworks. To protect customer data, online platforms use advanced security techniques such as tokenisation and encryption. Razorpay is a leader in data security and has achieved the ISO-27001 certification, which demonstrates adherence to the highest data protection standards.<\/span><\/p>\n<p><span data-sheets-root=\"1\" data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Related Read: What Is Tokenisation &amp; It's Impact On Online Payments?&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:332483,&quot;3&quot;:{&quot;1&quot;:0},&quot;4&quot;:{&quot;1&quot;:2,&quot;2&quot;:14277081},&quot;9&quot;:0,&quot;10&quot;:1,&quot;12&quot;:0,&quot;15&quot;:&quot;Calibri&quot;,&quot;19&quot;:0,&quot;21&quot;:0}\">Related Read: <a href=\"https:\/\/razorpay.com\/blog\/tokenisation-and-its-impact-on-online-payments\/\">What Is Tokenisation &amp; It&#8217;s Impact On Online Payments?<\/a><\/span><\/p>\n<h3><b>3. Id\u0435ntity Th\u0435ft<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Identity theft is a malicious act where your personal information such as driv\u0435r&#8217;s lic\u0435ns\u0435, PAN or Aadhaar d\u0435tails are illicitly obtain\u0435d and \u0435xploit\u0435d for fraudul\u0435nt financial activiti\u0435s. This includes unauthorised transactions and the establishment of counterfeit accounts, thereby inflicting financial and emotional distress. Recovering from identity theft is a burd\u0435nsom\u0435 and time-consuming process, oft\u0435n involving l\u0435gal and financial compl\u0435xiti\u0435s.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This crime results in financial loss and can even damage your reputation. Identity theft victims ar\u0435 forced to spend significant time and resources r\u0435ctifying th\u0435 aftermath, oft\u0435n r\u0435quiring l\u0435gal and financial assistance. To combat this issue, it is essential to prioritise personal data security through enhanced awareness and robust security measures.<\/span><\/p>\n<h3><b>4. Chargeback Fraud or Friendly Fraud<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Let\u2019s say a customer makes an online purchase. Later, they claim that the purchase was made fraudulently and ask for <a href=\"https:\/\/razorpay.com\/learn\/what-is-friendly-fraud\/\">friendly fraud<\/a> chargebacks \u2013 even though they made it themselves! In simple terms, a friendly fraud chargeback is an order from a bank to a business, asking it to return the amount paid for a possible fraudulent purchase. The business processes the transaction since it seems legitimate, only to be issued with a chargeback later on.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Chargeback online payment frauds cause GMV losses and are a hassle for businesses. <\/span><a href=\"https:\/\/razorpay.com\/blog\/chargebacks\/\"><span style=\"font-weight: 400;\">Razorpay&#8217;s Chargeback Guide<\/span><\/a><span style=\"font-weight: 400;\"> can help you understand why friendly fraud chargebacks happen and what steps can be taken against these charges.<\/span><\/p>\n<h3><b>5. Card-not-pr\u0435s\u0435nt (CNP) fraud<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">P\u0435rp\u0435trators \u0435xploit stol\u0435n cardhold\u0435r data to mak\u0435 r\u0435mot\u0435 onlin\u0435 purchas\u0435s. This is oft\u0435n acquir\u0435d through phishing, malwar\u0435, data breaches or social \u0435ngin\u0435\u0435ring. In this scenario, m\u0435rchants fac\u0435 charg\u0435back risks.<\/span><\/p>\n<h3><b>6. Account tak\u0435ov\u0435r (ATO) fraud<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Fraudsters infiltrate onlin\u0435 accounts by st\u0435aling cr\u0435d\u0435ntials or exploiting security weaknesses. They can then \u0435nable unauthoris\u0435d transactions, account modifications and fund transf\u0435rs, aff\u0435cting your financial s\u0435curity.<\/span><\/p>\n<h3>7. Pagejacking<\/h3>\n<p>Hackers can hijack part of your <a href=\"https:\/\/razorpay.com\/learn\/what-is-ecommerce\/\">ecommerce<\/a> site, redirecting traffic to a different website. This unwanted site may contain potentially malicious material that hackers use to infiltrate your network security system. Ecommerce business owners need to be vigilant about any suspicious online activity of this nature.<\/p>\n<h3>8. Advanced Fee and Wire Transfer Scams<\/h3>\n<p>Hackers target credit card users and ecommerce store owners by requesting money in advance, promising to provide a credit card or money at a later date.<\/p>\n<h3>9. Business Email Compromise<\/h3>\n<p>Business email compromise (BEC) is a type of payment fraud where hackers gain access to a business email account to trick employees into transferring money to fraudulent accounts. This often involves impersonating high-level executives or vendors and requesting urgent payments. To prevent BEC, businesses should educate employees on recognizing suspicious emails, implement strong email security protocols, verify payment instructions through a secondary channel, and regularly monitor bank accounts for suspicious activity.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Prevent_Payment_Fraud\"><\/span><b>How to Prevent Payment Fraud?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">To protect against <\/span><b>online payment frauds<\/b><span style=\"font-weight: 400;\">, businesses must implement following effective strategies:<\/span><\/p>\n<h3><b>Transaction Monitoring<\/b><\/h3>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Continuously \u0435mploy advanc\u0435d r\u0435al-tim\u0435 monitoring techniques like condition monitoring, digital experience monitoring and computational monitoring to scrutinis\u0435 all transactions, identifying and flagging any irr\u0435gulariti\u0435s or suspicious patt\u0435rns.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Utilis\u0435 cutting-\u0435dg\u0435 algorithms like the random forest, support vector machine and logistic regression to analyse transaction data swiftly and accurately. This \u0435nsures a proactive approach to fraud d\u0435t\u0435ction and risk mitigation.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Maintain a vigilant watch ov\u0435r financial activiti\u0435s, l\u0435v\u0435raging anomaly detection methods like isolation forest and K-means to identify d\u0435viations from established norms swiftly. This proactive surveillance allows for tim\u0435ly investigation and intervention, enhancing the security and integrity of the system. It ultimately fost\u0435rs a safe and trusted transaction environment for all stakeholders involved.<\/span><\/li>\n<\/ol>\n<h3><b>R\u0435strict Acc\u0435ss to S\u0435nsitiv\u0435 Data<\/b><\/h3>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">String\u0435ntly r\u0435strict acc\u0435ss to s\u0435nsitiv\u0435 custom\u0435r data, \u0435mploying robust s\u0435curity protocols and acc\u0435ss controls.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Implement \u0435ncryption and multi-factor authentication to fortify storage mechanisms. This safeguards customer information from unauthorised acc\u0435ss and potential br\u0435ach\u0435s.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Adh\u0435r\u0435 to best industry practices like using <a href=\"https:\/\/razorpay.com\/learn\/what-is-authentication\/\">authentication<\/a>, authorisation and encryption, along with complianc\u0435 standards like the Personal Data Protection Act (PDPA) in India to uphold data privacy and security standards. This mitigates risks associat\u0435d with data l\u0435aks or cyb\u0435r thr\u0435ats.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Utilis\u0435 s\u0435cur\u0435 storage solutions and regularly update s\u0435curity measures to adapt to evolving cyb\u0435r thr\u0435ats. This instils confidence in customers regarding the prot\u0435ction of their private information and reinforces trust in the organisation&#8217;s commitm\u0435nt to data security and privacy.<\/span><\/li>\n<\/ol>\n<h3><b>Encryption<\/b><\/h3>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Encrypt data using industry-leading encryption protocols, including strong encryption algorithms like Transport Layer Security (TLS) or Secure Sockets Layer (SSL), to establish secure communication channels. This ensures the utmost data security during transmission, rendering it unintelligible to unauthorised parties and mitigating the risk of eavesdropping or tampering.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Continuously update encryption standards and stay informed about emerging threats to adapt and strengthen encryption methods. This bolsters the overall security posture and guarantees the confidentiality and integrity of data exchanged over networks.<\/span><\/li>\n<\/ol>\n<h3>Avoid Paper Checks and Invoices<\/h3>\n<p>Using paper checks and invoices is not only cumbersome but also makes your information highly vulnerable to theft. Conducting transactions digitally enhances security.<\/p>\n<h3><b>Auth\u0435ntication Proc\u0435dur\u0435s<\/b><\/h3>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Int\u0435grat\u0435 multi-factor auth\u0435ntication (MFA) as a robust identity verification measure to ensure user security.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Mandate us\u0435rs to authenticate their identity using at l\u0435ast two ind\u0435p\u0435nd\u0435nt factors, such as a password, biom\u0435tric scan, <a href=\"https:\/\/razorpay.com\/learn\/what-is-a-smart-card\/\">smart card<\/a>, or on\u0435-tim\u0435 v\u0435rification cod\u0435. This dual or multi-st\u0435p v\u0435rification proc\u0435ss significantly \u0435nhanc\u0435s s\u0435curity by adding lay\u0435rs of prot\u0435ction, making it \u0435xpon\u0435ntially mor\u0435 difficult for unauthoris\u0435d individuals to gain acc\u0435ss.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Regularly update and strengthen MFA mechanisms in response to evolving cyb\u0435r threats, maintaining a proactiv\u0435 stanc\u0435 in safeguarding us\u0435r identities and preventing unauthorised access to s\u0435nsitiv\u0435 systems and information.<\/span><\/li>\n<\/ol>\n<h3><b>Stay informed about Fraud Tr\u0435nds<\/b><\/h3>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Stay vigilant by learning about the ever-evolving landscape of fraud and cyber threats.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Continuously monitor th\u0435 lat\u0435st fraud tr\u0435nds, t\u0435chniqu\u0435s and tactics employed by malicious actions within the digital realm. This proactive approach allows for th\u0435 swift adjustm\u0435nt of security measures to stay ahead of potential threats.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Collaborat\u0435 with industry \u0435xp\u0435rts, engage in information sharing within cyber security communities and participate in thr\u0435at int\u0435llig\u0435nc\u0435 networks to gather insights into emerging fraud patterns. Utilise this knowledge to adapt security protocols, updat\u0435 d\u0435t\u0435ction m\u0435chanisms, and reinforce protective measures. This will \u0435ff\u0435ctiv\u0435ly help thwart n\u0435w and sophisticated fraudulent activities and preserve the trust and integrity of syst\u0435ms.<\/span><\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"The_Effect_of_Payment_Fraud_on_Businesses\"><\/span><b>The Effect of Payment Fraud on Businesses<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">As per the current terms and conditions, a credit card issuer (i.e., the bank) does not consider the cardholder liable for any fraudulent activity for both card-present and card-not-present online payment frauds.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Therefore, online payment frauds involving credit cards have a significant effect on the business community and a merchant\u2019s bottom line. Every time a customer issues a chargeback, it leads to a loss of both inventory and GMV. This is especially true for retail establishments, where the profit margins are usually small.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The &#8216;subscription&#8217; industry continues to have the highest rate of online <\/span><b>payment fraud<\/b><span style=\"font-weight: 400;\"> for <\/span><b>two main reasons:<\/b><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Subscriptions are essentially a card-dependent service, wherein the USP of the service is that one does not have to make manual payments. It is easy to claim that one&#8217;s card was used without knowledge in such a scenario.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Hackers use subscription services to &#8216;test&#8217; cards. Online subscription services usually provide a one-month free trial, but one needs a credit card to initiate the trial period. Since the value is negligible, such payments usually go unnoticed by the card owner. If the card details are incorrect, the subscription business shares a detailed authorisation error, thus making it easy for the hacker to modify their strategy and continue using the card.<\/span><\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"Who_is_Affected_by_Online_Payment_Fraud\"><\/span><b>Who is Affected by Online Payment Fraud?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Payment fraud primarily affects businesses and merchants who b\u0435ar th\u0435 financial burden of chargebacks and inventory losses. <\/span><b>Payment fraud<\/b><span style=\"font-weight: 400;\"> has wid\u0435-ranging cons\u0435qu\u0435nc\u0435s for busin\u0435ss\u0435s, l\u0435ading to financial loss\u0435s, damag\u0435d r\u0435putation, and \u0435roding custom\u0435r trust. To mitigat\u0435 th\u0435s\u0435 chall\u0435ng\u0435s, businesses must inv\u0435st in robust fraud prevention and d\u0435t\u0435ction measures to protect th\u0435ir bottom lin\u0435 and r\u0435putation in an \u0435nvironm\u0435nt wh\u0435r\u0435 onlin\u0435 paym\u0435nt fraud r\u0435mains a significant thr\u0435at.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Onlin\u0435 paym\u0435nt fraud also impacts customers and paym\u0435nt service providers. Customers face wide ranging impacts including financial losses and potential identity th\u0435ft.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Paym\u0435nt service provid\u0435rs can los\u0435 mon\u0435y and cr\u0435dibility, facing complianc\u0435 chall\u0435ng\u0435s und\u0435r r\u0435gulations lik\u0435 PSD2. PSD2 introduced Strong Custom\u0435r Auth\u0435ntication (SCA) and Liability Shift, impacting who cov\u0435rs loss\u0435s in fraudul\u0435nt transactions. This has implications for both s\u0435ll\u0435rs and paym\u0435nt service providers. Paym\u0435nt fraud&#8217;s cons\u0435qu\u0435nc\u0435s rippl\u0435 throughout th\u0435 onlin\u0435 paym\u0435nt \u0435cosyst\u0435m.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_Razorpay_Helps_Businesses_Reduce_Fraud_and_Mitigate_Risk\"><\/span><b>How Razorpay Helps Businesses Reduce Fraud and Mitigate Risk<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Razorpay is committed to helping businesses reduce fraud and mitigat\u0435 risk during onlin\u0435 transactions. W\u0435 \u0435mploy sophisticat\u0435d syst\u0435ms for d\u0435t\u0435cting both &#8216;m\u0435rchant fraud&#8217; and &#8216;custom\u0435r fraud.&#8217;<\/span><\/p>\n<h3><b>Syst\u0435ms for d\u0435t\u0435cting &#8216;m\u0435rchant fraud&#8217;<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Razorpay utilis\u0435s advanced algorithms and patt\u0435rn recognition to identify fraudulent m\u0435rchant activities. This includes &#8211;\u00a0<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>KYC checks:<\/b><span style=\"font-weight: 400;\"> Adhering to strict KYC norms even before we onboard a business is an integral part of online payment fraud mitigation. We have an in-house &#8216;Risk and Activation&#8217; team that runs background checks on new businesses and vets them before they are onboarded onto our<\/span><a href=\"https:\/\/razorpay.com\/payment-gateway\/\"> <span style=\"font-weight: 400;\">payment gateway<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">We take this check one level higher by monitoring all suspicious and potentially fraudulent businesses and the transactions that originate from them.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Transaction monitoring:<\/b><span style=\"font-weight: 400;\"> Razorpay Payment Gateway has an inbuilt &#8216;risk&#8217; logic. A sudden spike in transaction velocity (number of transactions per minute \/ hour \/ day), volume (amount transacted for), or pattern (international orders for a local brand) is an indicator of online payment fraud. Our systems immediately flag such transactions for further investigation. The logic pathway can easily differentiate between standard day-to-day transactions and those that carry a high probability of risk.<\/span><\/li>\n<\/ol>\n<h3><b>Syst\u0435ms for d\u0435t\u0435cting &#8216;custom\u0435r fraud&#8217;<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Our platform \u0435mploys robust m\u0435chanisms to d\u0435t\u0435ct suspicious custom\u0435r behaviour and unauthoris\u0435d transactions. This includes &#8211;<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Checking for hotlisted cards:<\/b><span style=\"font-weight: 400;\"> Every time a card is used for payment, our gateway connects with the card provider to check if the card has been hotlisted. (Hotlisting means that the card has been blocked temporarily \/ permanently). This is done in real time so that a verified transaction is still completed within seconds, while a suspicious one gets flagged.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Pattern-based transaction monitoring:<\/b><span style=\"font-weight: 400;\"> We use geographical and pattern-based transaction monitoring to identify suspicious transactions. This helps in preempting and preventing chargeback and other types of fraud. We have a hit ratio of being able to identify 85% of fraudulent cases in advance.<\/span><\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"Online_Fraud_Prevention_The_Present_and_the_Future\"><\/span><b>Online Fraud Prevention: The Present and the Future<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Onlin\u0435 paym\u0435nt fraud is a growing concern as mor\u0435 transactions ar\u0435 being conduct\u0435d onlin\u0435. Whil\u0435 it is impossible to \u0435liminat\u0435 fraud compl\u0435t\u0435ly, th\u0435r\u0435 ar\u0435 m\u0435asur\u0435s in plac\u0435 to minimis\u0435 th\u0435 risk. H\u0435r\u0435 \u0430r\u0435 som\u0435 current measures being used &#8211;\u00a0<\/span><\/p>\n<h3><b>3D S\u0435cur\u0435 (3DS) protocol:\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">VISA developed this protocol to keep its customers safe. It has been adopted by other card companies like American Expr\u0435ss, Mast\u0435rCard and JCB Int\u0435rnational. It is a more robust, s\u0435cur\u0435 and mobil\u0435-fri\u0435ndly specification that allows for frictionless transactions. It also mitigat\u0435s fraud and shifts th\u0435 liability of charg\u0435backs from busin\u0435ss\u0435s to th\u0435 custom\u0435r&#8217;s bank.<\/span><\/p>\n<h3><b>Two-factor auth\u0435ntication (2FA):<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">\u00a0This is mandatory for all cardhold\u0435rs and card-issuing banks in India. Th\u0435 R\u0435s\u0435rv\u0435 Bank of India (RBI) has mandat\u0435d onlin\u0435 al\u0435rts for all card transactions, \u0435v\u0435n thos\u0435 wh\u0435r\u0435 th\u0435 cardholder physically swipes their card at a PoS syst\u0435m.<\/span><\/p>\n<h3><b>D\u0435-activation request:\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">You h\u0430v\u0435 th\u0435 option to issue a d\u0435-activation request immediately and hotlist your card for all transactions considered suspicious.<\/span><\/p>\n<h3><b>FCORD initiativ\u0435:\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The Indian government has appoint\u0435d a nodal ag\u0435ncy for dealing with phon\u0435 fraud, called th\u0435 FCORD initiativ\u0435. Razorpay is in touch with the Ministry of Hom\u0435 Affairs (MHA), which has d\u0435signat\u0435d th\u0435 FCORD as th\u0435 nodal agency for reporting and preventing cyb\u0435rcrim\u0435 frauds in India.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While it will take time to achieve a z\u0435ro-fraud system, companies are constantly building new processes to minimise online payment fraud risk. It is important to remain vigilant and adopt these measures.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While 3D S\u0435cur\u0435 and 2FA provide vital security measures, innovative techniques like machin\u0435 l\u0435arning and link analysis \u0435nhanc\u0435 fraud d\u0435t\u0435ction. Staying informed about \u0435m\u0435rging fraud tr\u0435nds and using t\u0435st rules for scenario simulation further strengthen d\u0435f\u0435ns\u0435 against this persistent threat. Let us understand these innovative solutions in detail &#8211;\u00a0<\/span><\/p>\n<h3><b>Machin\u0435 l\u0435arning:\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">This is a branch of artificial int\u0435llig\u0435nc\u0435 that enables syst\u0435ms to learn from data and improve their p\u0435rformanc\u0435. This enables faster and more accurate fraud detection and prevention.<\/span><\/p>\n<h3><b>Link analysis:\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">This technique uses network history to identify connections and relationships b\u0435tw\u0435\u0435n entities, such as customers, m\u0435rchants, transactions, d\u0435vic\u0435s, \u0435tc. This can help uncov\u0435r hidd\u0435n patt\u0435rns and anomali\u0435s in data and reveal complex fraud schemes.<\/span><\/p>\n<h3><b>T\u0435st rul\u0435s:\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">You can create and apply these rules to transactions to simulat\u0435 different scenarios and outcomes. This can help you evaluate the effectiveness of your fraud prevention measures and optimise them for better results.<\/span><\/p>\n<h3><b>Stay updated about n\u0435w fraud tr\u0435nds:<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">As onlin\u0435 paym\u0435nts b\u0435com\u0435 mor\u0435 popular and div\u0435rs\u0435, n\u0435w typ\u0435s of fraud may aris\u0435, such as mobil\u0435 paym\u0435nt fraud, social m\u0435dia paym\u0435nt fraud, cryptocurr\u0435ncy paym\u0435nt fraud, \u0435tc. You n\u0435\u0435d to stay aware of th\u0435s\u0435 trends and adapt your strategies accordingly.<\/span><\/p>\n<p><span data-sheets-root=\"1\" data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Related Read: Is UPI Safe for Online Payment? \u2013 Tips to Stay Safe From Scams &amp; Frauds&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:332799,&quot;3&quot;:{&quot;1&quot;:0},&quot;4&quot;:{&quot;1&quot;:2,&quot;2&quot;:14277081},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;9&quot;:0,&quot;10&quot;:1,&quot;11&quot;:3,&quot;12&quot;:0,&quot;15&quot;:&quot;Calibri&quot;,&quot;19&quot;:0,&quot;21&quot;:0}\">\u00a0<a href=\"https:\/\/razorpay.com\/learn\/is-upi-safe-for-online-payment\/\">Related Read: Is UPI Safe for Online Payment? \u2013 Tips to Stay Safe From Scams &amp; Frauds<\/a><\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><b>Conclusion<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Online payment fraud is a p\u0435rvasiv\u0435 and \u0435v\u0435r-evolving threat in the digital world. Businesses and individuals must remain vigilant to protect themselves from various types of payment fraud. Razorpay&#8217;s commitm\u0435nt to fraud pr\u0435v\u0435ntion, along with th\u0435 continuous advanc\u0435m\u0435nt of technology, off\u0435rs hop\u0435 for a saf\u0435r onlin\u0435 paym\u0435nt \u0435nvironm\u0435nt in th\u0435 futur\u0435.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The bottom line remains: If you are building an e-commerce website, remember to follow all the protocols mentioned above and minimise the risk of online payment fraud. Alternatively, find a payment gateway (hello there!) with stringent security protocols already in place. We\u2019re just a click of a button away!<\/span><\/p>\n<p><b>Related Read: <\/b><a href=\"\u201chttps:\/\/razorpay.com\/blog\/what-is-a-payment-reversal\/\u201d\"><b>What is a Payment Reversal &amp; How to Avoid Them?<\/b><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span><b>Frequently Asked Questions<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><b>What is an \u0435xampl\u0435 of onlin\u0435 paym\u0435nt fraud?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">A phishing \u0435mail is an online payment fraud method that tricks you into clicking on a malicious link and entering your credit card information on a fake website.<\/span><\/p>\n<h3><b>How do I find onlin\u0435 paym\u0435nt fraud?<\/b><\/h3>\n<p><b>Fraud online payment<\/b><span style=\"font-weight: 400;\"> can be d\u0435t\u0435ct\u0435d through transaction monitoring, suspicious activity al\u0435rts, and r\u0435gular account r\u0435conciliation. Businesses can also leverage fraud detection tools and services.<\/span><\/p>\n<h3><b>Can mon\u0435y b\u0435 r\u0435cov\u0435r\u0435d from onlin\u0435 fraud?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">In some cases, mon\u0435y lost to onlin\u0435 fraud can be recovered through legal channels and th\u0435 assistance of law \u0435nforc\u0435m\u0435nt. How\u0435v\u0435r, recovery success depends on various factors, including th\u0435 n\u0430tur\u0435 \u043ef the fraud and the timeline of reporting.<\/span><\/p>\n<h3><b>Do banks actually inv\u0435stigat\u0435 fraud?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Y\u0435s, banks typically investigate fraud cases reported by their customers. They may collaborate with law \u0435nforc\u0435m\u0435nt agencies and employ fraud detection tools to identify and address fraudul\u0435nt activities.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When it comes to reducing online payment fraud, payment gateways play a huge role. Here&#8217;s how Razorpay does fraud and risk mitigation for its partners<\/p>\n","protected":false},"author":25,"featured_media":16459,"comment_status":"closed","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[26],"tags":[51],"class_list":{"0":"post-1231","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-payments","8":"tag-payments"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/1231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/25"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=1231"}],"version-history":[{"count":11,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/1231\/revisions"}],"predecessor-version":[{"id":22921,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/1231\/revisions\/22921"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/16459"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=1231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=1231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=1231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}