Every time you turn around, there’s a new scam to watch out for. Indeed, as fast as technology advances, cybercrime seems in lockstep, ready to leap at every opportunity to benefit from new gadgets and software.
Merchants are desperate for a break from cybercrime and tech-based attacks. They tend to shy away from emerging tech out of fear that it’ll bring new vulnerabilities. However, the same technology used against you might also hold the solutions you’re searching for.
When properly managed, payment technology can be deployed to better communicate and respond to incoming issues and produce faster and more accurate results across the board. But for this to happen as soon as it needs to, the payments industry must unite as a single entity to fight back.
Cybercrime Pays
Let’s face it: we live in the era of instant gratification.
We’re at the middling stages of the digital age, and the only language we speak is ‘now’. The result is an incomprehensibly vast digital landscape through which people can meet nearly every demand they have at the push of a button.
Technological innovations guarantee the “instant gratification generation” can have access to whatever payment method they want, when they want it. But as stated above, merchants and banks aren’t the only entities that benefit from having multiple payment options.
Cybercriminals are willing to engage in multi-faceted attacks on just about every financial agency and institution on the planet. This means that fraud tends to grow parallel with technological advancement, despite every effort to curtail this issue with more technology. For example, with the rise of “but now, pay later” and recurring digital billing cycles, the same payment infrastructure intended to increase convenience is also an invitation for eCommerce fraud.
Now, it’s true that the financial industry is responding to these threats. However, they’re largely going about it in the wrong way. Tackling fraud is on everyone’s agenda, but there’s little cohesive communication between parties that could significantly alter the trajectory of most antifraud solutions.
To put it bluntly: cybercriminals work hard to crack systems because cybercrime pays.
According to Cybercrime Magazine, the global market will lose nearly $11 trillion to digital fraud by 2025. This staggering figure should be a clear indication that the financial industry is responding to these threats in the wrong way.
The Threat is Real
Most customers aren’t on the hook for fraud when criminals breach their information or account credentials. Merchants, on the other hand, aren’t so lucky. While customers can usually depend on their FDIC-insured bank or card network to bail them out of trouble above a certain amount, merchants have very few safeguards to alleviate their losses.
However, although customers aren’t held liable for these breaches, said breaches almost always originate with them. Customers are targeted in a variety of ways, but some of the most common tactics include:
- Identity theft: Identity theft occurs when a criminal uses a legitimate customer’s identifying information to make a fraudulent purchase or commit various other crimes
- Merchant identity fraud: Similar to identity theft, merchant identity fraud occurs when someone poses as a legitimate merchant or financial entity to defraud an individual, institution, or business.
- Phishing: Phishing occurs when a fraudster sends bogus emails with links leading to malicious software or to trick a customer into revealing sensitive information like passwords.
- Pagejacking: Occurs when a fraudster steals a legitimate company’s source code and mirrors it over a bogus site.
Fraud Detection is Not Enough
Unfortunately, the attacks I listed are only the tip of the iceberg. More and more cyberattacks pop up every year, causing untold losses and further complicating an already complex collection of issues.
Fraud detection software does exist, and it is effective…at least, to a point.
Although it can often work too well (as with false negatives and positives), most fraud detection methods are wholly ineffectual on their own. Remember that most customers will be turned off by companies that reject their transactions without cause, which is why false negatives are such a big problem. Thus, merchants and financial institutions must strike an intricate balance between fraud detection that works and solutions that don’t turn away legitimate customers.
As transaction types grow and expand into new and more convenient avenues for consumers, the payments industry must develop and test the options that keep their transactions safe and secure. Fraud detection solutions alone cannot do this… which is why collaboration is needed now, more than ever.
Unite Against Crime
It’s no secret that every merchant and institution has its own theories, systems, and methodology. But, maybe now is a great time to work on collaborative fraud solutions that benefit everyone…. simultaneously.
If we’re meant to respond to and fight cybercrime in real-time, we have to get over the idea that each company will solve this problem independently and essentially privatize the solution. If this were remotely possible, it would have succeeded by now.
Besides, cybercriminals aren’t attacking alone. They work with and for their direct competitors to rip us off, and the longer we each imagine that we can continue to go at it alone, the higher the fraudsters’ profits will be. What we need is a collaborative framework to help all of us respond to and prevent cybercrime.
If the aim is to stop cross-border fraud, the communal focus should be to pool resources and respond in real-time. This idea could take shape in various ways, building upon the existing AML (anti-money laundering) legislation that banks use to flag and report potential criminal activity through an automated system. In the UK, banks and processors use a fraud intelligence system to identify and report fraudulent and potentially fraudulent transactions through a shared database.
Ultimately, these collaborative systems could very well be the key to solving the problem of cybercrime. In this way, we’d use the technological advances we’ve come to dread to single out frequent offenders, decrease botnet attacks, and identify synthetic fraud.
Whatever the future of the payments industry, a collaborative approach to cyber fraud benefits everyone.
