The technological revolution has bought a radical change in almost every vertical on the planet. One of the most appreciated innovations of all time is the digitization of payments. We all know what it feels like to transfer money, pay bills, and purchase anything within the comforts of our homes. As per a study discussed at Money 2.0 Conference, online payments gained momentum after 2009, which has changed the way how businesses operate.
However, frauds and scams are also happening simultaneously with the rise of online payments. Here, we will discuss the most common type of fraud in online payments – Payment gateway fraud.
Statista states that e-commerce losses to online payment fraud were estimated at 20 billion U.S. dollars globally in 2021. This is a particularly alarming number, which is why consumers and businesses must get well informed about these types of frauds to keep themselves safe.
What is a Payment Gateway?
It is a type of merchant service provided by an e-commerce service company to generate and regulate payments with different modes such as credit cards, debit cards, UPI, or digital wallet accounts. To be more precise, every time we select a product or service online, as we proceed to buy, a page asks us for the mode of payment. This page is known as a payment gateway, and it acts as a catalyst between consumers and merchants to make payments.
Financial leaders said that the payment gateway industry would contribute dynamically to the global economy at a digital finance summit.
Payment Gateway Scam
It is a criminal activity where a scammer uses another person’s money or personal details to order products or services online, or steals their details while they are trying to make a payment.
Payment gateway fraud happens in three ways
- Fake transactions
- Stealing products and services
- Fake requests for refund or return
Type Of Payment Gateway Frauds
Since the payment gateway is the link between merchant and consumer, there are multiple types of payment fraud.
This type of fraud is as old as online payment. Any websites which require your personal information like account number, PIN number, or passwords are vulnerable to this kind of fraud. Phishing scams always happen on unauthentic websites.
- Identity Theft
It happens when a scammer steals your personal information while making a payment and then uses that information against you or orders products online without your notice. Identity theft is a very common yet serious scam that can put a victim in unexplained trouble.
- Account hacking
This is one of the most dangerous scams where the cybercriminal directly hacks the user’s account during the payment process and uses the bank information to steal money, collect personal information, or order products online.
- Redirecting Page Scams
These scams are not easy to identify. Here, a cybercriminal tries to redirect you to some other page that creates viruses and hacking links. They can easily trick us into making us click on any links.
- Merchant Scams
It happens when a scammer creates a fake account of a merchant, which appears to be real on e-commerce platforms. Unknowingly, buyers make payments to these fake accounts and losses their money. As a result of this, the merchant has to pay the loss of the consumer.
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Preventing Payment Gateway Scams
Fortunately, payment gateways offer us a variety of payment options that can provide us with much safety. To prevent payment gateway fraud, it is necessary that both parties should take action. Merchants have to invest in new technology and tools which will protect their online business from such frauds. In contrast, the consumers have to keep themselves well informed about the scams that can happen during online transactions.
Here are some established ways to prevent Payment Gateway Fraud:-
It is a great strategy for business owners as well as for buyers. Datta enrichment or enhancement is the activity to record data of existing and previous customers. This is usually done by software, which makes it more reliable without the fear of any human error. Even before making any transaction, the data can check the information of the buyer. This will help us to detect any fraud activity.
Using Card Verification Value (CVV)
This is the most time-saving and safest way to ensure no scams on the payment portals. The CVV number is a unique number known by the card owner only, and it is nearly impossible to steal the CVV number through digital modes.
3-D Secure methods
Investment in this kind of system will bear positive fruits for your business. 3D secure is an additional security layer that a consumer has to go through while making a payment, and it is linked through our bank account. Every time when a buyer makes a payment, it has to clear one authentication process through an SMS or an email.
Social Media Verification
With the help of data enrichment, it is easy to keep track of buyers’ social media presence. E-commerce websites want us to create an account on their website before getting started, and we have to link our phone numbers with these accounts before making any transactions. It will automatically push a lot of scammers out of the game.
Payment Gateway With Installed Fraud Detection Tools
Many international companies such as PayPal and Wordplay provide payment gateways with installed fraud detection tools. If merchants can invest in this software, then nothing like it. This software properly maintains card data and reviews everything manually. With this technology, scammers can’t commit any fraud.
The Future Of Payment Gateways
According to Money 2.0 Conference, a digital financial summit, it is estimated that the payment gateway market will rise up to the value of $88 billion. It is clear that our ecosystems will progress in the future, leading finance sectors to become more occupied with automation and machine learning.
Thus, with the help of the Internet of Things (IoT) and Artificial Intelligence, the payment gateway will undergo a transformation. It is believed that we will see fraud-free transactions in the next few years, which will greatly enhance the economy by building transparency and trust between the merchant and the consumer.
Moreover, payment gateways will boost the economy by creating thousands of new e-commerce platforms and jobs.