How to detect different online frauds

As a business, it’s important to keep your customer data safe, as well as your own sensitive information. Without the right security protocols and systems in place to detect online fraud attempts, you leave yourself open to damage that can be irreparable.

Online frauds don’t discriminate, meaning your business, whether it’s a big one or not, can be open to threats from online attacks. Many of us will know the dangers of cybercrime and online fraud is a part of that network that is causing much heartache for businesses and customers who trust these organizations to take care of their information.

Detecting different online frauds are useful to help prevent them from happening to your own business this year and beyond. In this guide, we’ll explore the types of online frauds that exist and how you can become familiar with detecting them in your business.

According to PWC, the threat of online fraud is increasing, especially with more businesses operating online and encouraging customers to conduct their business digitally rather than in-person. A lot of companies exist solely online nowadays and so many scam artists online are utilizing the vulnerabilities of individuals and businesses that are often so readily available. 

In PwC’s Global Economic Crime and Fraud Survey 2022, that surveyed 1,296 executives across 53 countries, found 46% of the surveyed organizations reported experiencing fraud in the last 24 months.

The same survey found that nearly 70% of the organizations also said fraud was the most disruptive incident that occurs via an external attack.

There are a number of online fraud types worth knowing about, especially as those that are more common are going to be useful to look out for as a business. A lot of e-commerce businesses are particularly at risk with some of these methods of committing fraud.

Identity Theft (or Payment Fraud)

Identity theft, or payment fraud as it’s also known, is the most common type of fraud. It’s a method used by many cyber criminals to help swindle their way to getting free products, services and even money from loan companies.

Fraudsters will make up fake names, emails, etc. to seem like a real customer. They’ll then make fraudulent purchases or create accounts to manipulate traffic on the site.

Phishing or Email Spam

Many businesses can fall to this type of online fraud because so many of us now ocmmunicate and use our emails on a daily basis. Whether it be in a professional or personal capacity, phishing or email spam can happen to anyone.

It involves sending unsolicited emails that often contain links or downloads that infiltrate their devices and gain access to data or sensitive information that they could use to access various logins.

Friendly Fraud

Friendly fraud often happens by mistakes or through the design in place. For example, it could be a customer paying for a service or product that they claim never got delivered or carried out when it actually did. This often results in the business refunding or re-delivering the item. 

If they don’t, then the customer can request a chargeback that retrieves the funds from the merchant through the bank or payment provider.

Data Breaches

Data breaches are another common type of online fraud that has certainly increased in recent years. Data breaches are cyber attacks that successfully manage to access sensitive data that could be used to hold to ransom a company for financial gain, or to ruin the company from a reputational standpoint.

Understanding online frauds is just one way of protecting yourself as a business. The second is knowing how to detect these different online frauds.

1. Use tools like banking fraud detection as preventative measures.

When you’re trying to prevent online frauds, we are fortunate as online users to have a wealth of advanced tools and software in place to help alert and protect the business from any harm. At the very least, it can help minimize the potential damage caused by fraudsters online.

Whether it’s a banking fraud detection tool or implementing two-step authentications into customer logins, they act as preventative measures for your business. Not only do they help stop fraudsters from scamming you as a business, they also protect your customer’s security too.

2. Look at the user’s location.

A good way of spotting online fraud is by looking at the user’s location. When a customer makes an order or purchases a service, check their shipping/billing address and ensure that matches up with their IP address. They should all point to the same location and if they don’t, then this is an immediate red flag that should be looked into further 

The transactions that are the most secure are those where the shipping address, billing address, and IP address all point to the same location. Transactions that show long distances between these different addresses should be scrutinized more carefully.

3. Improve your employee’s knowledge and awareness of online frauds.

Your employees are an integral part to your business’ security, especially when they’re managing sensitive data of both the customer and organization itself. Having them understand what online frauds exist and what to look out for, will certainly help to reduce the risk of fraudsters finding vulnerabilities in the business.

Never assume that all of your employees have the common sense when it comes to spotting a scam. It’s not always the case and even the most internet-savvy employees can fall victim to an online fraud attempt.

4. Be wary about those using a VPN.

VPNs are becoming more commonly used by the general public, so it’s important to not reject order simply made via a virtual private network. However, any orders made through this method, may be worth following up with to ensure everything is legitimate with the customer.

Those wanting to commit a fraud will often hide behind the mask of a VPN. However, a simple request for the user to disable their VPN when it comes to placing an order is a great way around this. 

5. Look out for patterns of fraud and cyber theft.

Finally, look out for patterns of fraud and cyber theft during your day to day business transactions. Multiple failed transactions and using different payment methods are red flags that a fraudulent action is being taken.

If you spot these happening, you can easily blacklist the IP address, billing address or email of the individual. It’s very slim that you’re going to catch out innocent customers this way, so it’s a worthwhile practice to have in place.

Improving your business security is always worthwhile to do and so you should be looking at securing your organization regularly. Identifying the vulnerabilities or weak spots in your business is certainly going to help prevent you from becoming a victim of fradulant attacks.

Train your employees in cybersecurity

As mentioned above, the more your employees know when it comes to online fraud signs and cybercrime, the better. Train your employees up on cybersecurity so that they provide another layer of security for your business.Regular training is going to be beneficial for the safety of your customers but also for your staff too.

Strengthen your security measures

Your security measures should be tight and if they’re not, it only takes the one fraudster to successfully infiltrate your defences and cause substantial damage. Put tools and software in place to ensure it doesn’t happen to your business. For example, installing firewall software as well as fraud detection tools, are all great in helping strengthen the business.

Back up your data

Backing up your data is essential, especially in the event that your data gets compromised. Having back up data systems in place will help you in the event that a complete shutdown of your servers is required. Keep the backup data separate to your devices and ideally, off-site.

Keep data collection to a minimum

Finally, when it comes to data, only collect as much as you need to for your business. The more data you’re collecting, the more at risk your business can become. With further privacy policies coming into place, restrictions are already in place when it comes to what you can and cannot collect or share of your customer’s information.

Try to keep data collection to a minimum so that you don’t risk giving away too much if a data breach should occur.

Online fraud is a serious problem and one that more businesses need to be aware of. From understanding the fraud types, to spotting them in action and putting in the relevant preventative measures when required.

Early action can help reduce the risks of online fraud in your business and will avoid you falling victim to a fraud that could do serious damage. Don’t let these modern-day fraudsters bring your business to it’s knees!

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