Enhancing Your Payment App Fraud Prevention Strategy

 

 
 
 
 
 
 
 
 

 Let's Talk Fraud second wrap-up blog header

June 15, 2022 | By Allied Solutions   

2022 has already seen a steep rise of fraud, and it’s not decreasing. As digital, touchless payments and person-to-person payment apps grow in popularity, so does the fraud in these areas. In fact, 53% of Americans have already been victims of digital payment fraud. Many financial institutions are underprepared for the amount of fraud that is accruing from the increase to digital payments, including the increased usage of person-to-person payment apps.

Person-to-person (P2P) payment apps include:

  • Apple Pay
  • Cash App
  • Facebook Pay
  • PayPal
  • Popmoney
  • Square
  • Venmo
  • Zelle

Bad actors can execute their fraud through various avenues. Here’s a common way that the bad guys commit fraud on person-to-person payment applications:

1) Commit a phishing scheme to trick the victim. This is usually a written communication like an email, text, or social media message, and can also be a phone call. In these communications fraudsters pretend to be the financial institution or a representative from the payment platform. 

2) Next the fraudster tricks your financial institution into initiating payment to themselves from your consumer’s account. They disguise this as a refund.

3) Your financial institution completes the transaction to the fraudster. This is how the fraudster completes the payment app fraud with ACH. The bad guys can also commit payment app fraud with linked debit cards and account numbers. 

Payment apps offer many opportunities for fraudulent activity, and the bad guys continue to steal funds from accountholders by hacking accounts, accessing compromised cards, and through stolen devices. Fraudsters are discovering that payment apps are an ideal channel for stealing funds from your consumers. Once the funds are stolen, they can be sent to fellow criminals and are very difficult to recover, leaving your consumer with lost dollars. 

 


For more fraud prevention insights, tune into our latest Let's Talk Fraud webinar here.

Here are 3 ways to reduce payment app fraud losses:

Detect
Consumer education is a very important part of payment app fraud detection. However, with the drastic rise of fraud and the creativity that the bad actors are leveraging, it is no longer sufficient to rely on your accountholders alone to detect this type of fraud. It is also not considered best practice to rely on the payment app platform or your card issuers to detect fraudulent activity. 
To fight against fraud, your institution needs to be able to detect when fraud is or is about to happen. Fraud detection and monitoring measures need to be sophisticated and real-time. 

Protect
Protecting against fraud is tedious and delayed without the right technology. When fraud is detected real-time it becomes easy to protect your institution and your consumers against losses.  An enterprise-wide risk management system is needed to monitor transactions across all channels for fraud and database intrusion in a real-time environment, rather than using batched data. This type of system aggregates your institution’s data on premise. Leveraging advanced artificial intelligence allows the system to act as an alerting smoke detector rather than a reactive fire hose. 

Respond
Historically, fraudsters have more agility to pivot to new fraud techniques than financial institutions do to stop them. With advanced, real-time fraud defense solutions like ToolCASE financial institutions are able to be more agile and proactive in responding to fraud when it occurs. In addition to a sophisticated fraud monitoring system, leverage your Allied Solutions Fraud Analyst to best assess how the fraud occurred, what can be done to stop it, and how to prevent it from happening again. 

Every dollar of fraud - regardless of the origination- costs a financial institution $4.00. With high losses, consumer vulnerability, and reputational risk on the line, financial institutions must have a proactive fraud detection strategy in place. The best way to purge and reduce payment app fraud is to implement stronger, more advanced technology than the fraudsters.

 

About Allied Solutions

Allied Solutions, LLC is one of the largest providers of insurance, lending, and marketing products to financial institutions in the US. Allied Solutions uses technology-based products and services customized to meet the needs of over 4,000 banks and credit unions, along with a portfolio of innovative products and services from a wide variety of providers. Allied Solutions maintains several offices strategically located across the country and is a subsidiary of Securian Financial Group, Inc.

 



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Content in the blog posts are the opinion and views of the writer, and don't necessarily reflect the opinions or views of Allied Solutions.

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