5 Ways the Payments Industry Combats Fraud
- October 5, 2022
In keeping with October’s National Cyber Awareness Month, we take a look at 5 measures the payment industries are doing to combat fraud. Each year, billions of dollars are lost to fraudulent activity, and this number is only expected to grow as criminals become more sophisticated. The payments industry has poured significant resources into various security measures to fight fraud and keep consumers safe.
1. Tokenization of Data
Tokenization is a process whereby sensitive data is replaced with a unique identifier (known as a token). This token can be used for authentication purposes without revealing the underlying data, making it much more difficult for criminals to access sensitive information. In addition, many payments companies are now using point-to-point encryption (P2PE) to protect data in transit. P2PE encrypts data from the moment it is entered into a payment device until it reaches the acquirer, making it virtually impossible for criminals to intercept and decode.
2. Biometrics and Geolocational Tools
As the payments industry continues to grow and evolve, so too does the challenge of fraud. In response, companies are increasingly turning to biometrics and geolocational tools to help fight fraud. Biometrics refers to the use of biochemical or physiological characteristics to identify individuals. This can include everything from fingerprint scanners to iris recognition systems. Geolocational tools, on the other hand, use location data to track and manage risk. By combining these two technologies, companies can more effectively identify and prevent fraud.
Biometrics provides a high level of security by allowing companies to verify the identity of individuals with a high degree of accuracy. This is especially important in the world of online payments, where it can be difficult to determine the identity of someone behind a computer screen. Geolocational tools, meanwhile, help to further reduce fraud by allowing companies to track where transactions are taking place. If a transaction is taking place outside of the usual geographic area for a particular customer, it can be flagged as potentially fraudulent. By using these tools in conjunction with each other, businesses can more effectively protect themselves against fraudsters.
3. Contactless Chip Cards, which utilize EV Technologies
The payments industry is always looking for ways to stay ahead of fraudsters and protect consumers. One way they’re doing this is by moving to contactless chip cards, which utilize EV technologies. EV, or encrypted value, technology is more secure than the traditional magnetic stripe card because it uses a unique code for each transaction that is generated by the cardholder’s bank. This makes it much harder for thieves to copy or use a stolen card because they would need to have the physical card in their possession in order to generate the code. As a result, EV cards are an important tool in the fight against fraud. In addition to EV cards, the payments industry is also working on developing other new technologies that will help to further secure transactions and protect consumers.
4. Industry use of digital ID, two-factor authentication
The payments industry is constantly evolving to stay one step ahead of fraudsters. One of the most effective tools in the fight against fraud is digital ID. By using a secure digital ID, businesses can verify the identity of their customers with a high degree of accuracy. This helps to prevent synthetic fraud, which is increasingly difficult to detect. In addition, the industry is making use of two-factor authentication and machine learning to help authenticate online transactions. This helps to stop identity fraud and protects businesses from losses. The payments industry is committed to fighting fraud and protecting businesses. By using the latest technology, we can keep businesses safe and secure.
5. Utilizing third parties to help validate identities
The payments industry is constantly fighting fraud, and one of the ways they do this is by utilizing third parties to help validate identities. This includes using the SSA (Social Security Administration) to verify social security numbers. By using the SSA’s database, businesses can confirm that the SSN belongs to the person who is using it. This helps to prevent identity theft and other types of fraud. There are other ways that businesses can validate identities, but using the SSA’s database is one of the most effective methods. By doing this, businesses can ensure that they are only dealing with legitimate customers.
See yourself as part of the solution
The Cybersecurity and Infrastructure Security Agency (CISA) and the National Cybersecurity Alliance (NCA) lead a collaborative effort between government and industry to raise cybersecurity awareness nationally and internationally. This year, they encourage individuals and families to “see yourself taking action to stay safe online” or “see yourself as part of the solution”. Their main areas of focus this year are:
Think Before You Click:
If there’s something strange about a link, think twice before clicking. It might be an attempt to obtain sensitive data or install malware.
Update Your Software:
Prompt action is key when you see a software update notification. Even better- set your updates to automatic.
Use Strong Passwords:
Use strong, unique passwords that are randomly generated, and store them using a password manager. This will ensure that your passwords are complex and secure.
Enable Multi-Factor Authentication:
You need more than just a password to safeguard your online accounts, and enabling MFA makes you considerably less likely to be hacked.
How Our Team Can Help
At Global Legal Law Firm, our lawyers are familiar with the rapidly changing nature of electronic payments processing, and the ever changing regulations involved, with decades of expertise in ISOs, processors, commercial collections, credit card brands, and other forms of electronic payment processing litigation. Let us guide you through this new and volatile environment, rather than attempting to navigate it on your own.
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