Tools for Detecting and Preventing Fraud
Tools for Detecting and Preventing Fraud

Types of Online Fraud and How to Prevent It

Consumer growth, high mobile penetration, and the increased confidence in relying on digital platforms and services are the driving factors of online business growth in Southeast Asia. However, online fraud is also on the rise. Vulnerabilities attract fraudsters and attackers and they see these as opportunities. Fraud attacks can affect the safety of your good customers and it can also be costly for your business to prevent them.  

In this article, we will discuss types of online fraud that has been negatively affecting online businesses today. 

What causes fraud in online businesses?
E-commerce sites, i-Gaming credits, food delivery apps, travel and booking sites, and more rely on online payments to keep their businesses alive. Since it is contactless, non-physical, and faceless, anyone from anywhere can exploit the weaknesses of the online payment process. Its convenient nature attracts bad individuals to commit cybercrimes anonymously or using a stolen identity.


What are the common types of online fraud?


Types of Online Fraud: Transaction fraud, Account takeover, and Bonus abuse


Transaction Fraud

One of the types of internet fraud is when someone uses a credit card that is not theirs, it is a stolen credit card purchase or simply called transaction fraud. Bad individuals make use of credit card credentials to purchase products or services online. 

There’s another problem that will directly affect your business. Once the real cardholder finds out about the unauthorized purchase, he or she will request a chargeback and this can cost you around USD 20 to USD 100. Transaction fraud is common, and chargebacks can hurt your finances. Credit companies may add you to the high-risk category, barring you from processing payment using their payment service.

How to prevent transaction fraud, then? Your business must make an effort to collect enough information without adding too many steps on your customers. A data enrichment solution can help you with this in no time.


Account Takeover

Including the common types of online fraud is if someone else uses an existing customer account that has been stolen through identity theft tactics like phishing — account takeover. It’s the same issue with transaction fraud, but much easier for the attacker to make more purchases, and more painful for you as you will have to spend resources to fight the fraudulent user so you can recover the account, and even request for chargebacks in the end, too.

To prevent account takeover in your online business, you can run an IP analysis to monitor the original IP address of the real user versus the potentially suspicious users with a different IP address.


Bonus Abuse

If a fraudster uses linked accounts to take advantage of online promotions, sign-up bonuses, and loyalty points (or loyalty rewards programs), that’s bonus abuse. An individual, regardless of them being a loyal customer or not, can create multiple social media accounts and e-mails to sign-up to get “first-time user” vouchers. Another merchant term that they can exploit is the referral program so that they can get referral bonuses or points. It may look great on your marketing analytics, but if it’s unusually high or you are noticing high churn, there might be bonus abuse happening. 

You do not need to cancel your loyalty rewards program though, but what you can do to fight bonus abuse is to rely on a social presence lookup and scoring tool. By checking social media accounts, whether if it’s a newly created one or long-tenured, you can tell if a user is just signing up to your online business for the perks and not for actual purchases.


What tools to use to prevent fraud? 

With all of these common types of online fraud, it is important for an online business to integrate a fraud prevention tool in your system. The name of the game in fraud prevention is to detect early on if a user is trustworthy or not. Of course, you have the right to protect your business from fraud attacks, since this will also keep your real, good customers’ identity and money safe. As your business is going strong, your efforts to keep fraudulent activities at bay should also be a top priority. But where and how to start?

You need to have good data sources and it has to be collected without any fuss for your customer. Of course, your fraud analytics efforts should be based on data that is available, quickly accessible, and compliant to security and data privacy policies across the globe.

Most importantly, you just need to have the right tools to quickly give a bed of nails to bad users while a bed of roses to the good ones. 

First, use a social media lookup tool to determine if a user’s e-mail address and mobile number are registered in top social media platforms. If the user has profiles that are updated, recently used, with a good profile photo, and well-tended bio, chances are that person has a digital footprint that you can trust. On the other hand, if the user has little to no presence on social media, you may need to think twice about onboarding that person. 

Second, since you have good data, you now have to decide fast, and what better way to do this is through integrating a social presence score tool into your fraud management system. 

Whatever your social media lookup tool acquires from your users’ e-mail addresses and mobile numbers, your social presence tool will instantly produce a score that can help you make a faster decision.


How to integrate your fraud prevention tools?

It depends on your processes and needs. FindSocial, a social media lookup and scoring tool by FinScore can provide you the tools in two ways. 

For high volumes of e-mails and mobile numbers, adding in the FindSocial API is the best way to go. But, if you are simply looking for a quick look at a small list of e-mails and mobile numbers, you can access the FindSocial web-based portal. 


Ready to Detect Fraud?

We hope that you were able to understand the common types of online fraud, how it works, and how to prevent fraud attacks. It will take time to make an informed decision if you truly need to integrate a social media lookup tool and scoring tool right now. 

But, what if you are still curious about FindSocial, can benefit your business specifically? You may be operating something unique. Let us help you with that. Feel free to ask us about FindSocial and our team will take care of you in no time

FinScore is a financial technology company in the Philippines that offers a powerful credit scoring platform and fraud detection tools based on alternative data, including telco-based data. 

As the pioneer in lending and scoring of the unbanked, we continuously provide fintech services that empower financial institutions, banks, and credit bureaus with flexible platforms to help them make insightful and reliable credit decisions. Contact us today to learn more about our products and solutions for financial institutions.


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