Cybercriminals perpetrate phishing online payment scams, identity theft, malware attacks, and fake customer support on an ever-evolving basis. These fraudulent activities impact victims on a monetary level, but also significantly impact the trust placed in digital systems. Because of this, it is crucial to know about the different types of online frauds in India, their signs, and how to remain safeguarded in a highly digitized world.
According to RBI data for FY 2024-25, there were 23,953 fraud cases across banks in India, involving a total loss of about ₹36,014 crore, up from ₹12,230 crore in FY 2023-24. [Source]
This article covers online fraud definition, explores various types of frauds in banks, and provides valuable tips to ensure one does not fall prey to online payment frauds. Apart from this, we will discuss how fraud prevention is enabled in digital systems Transaction Banking, Retail Payments, and Government Solutions.
What is Online Payment Fraud?
Online payment fraud is defined as any unauthorized digital transaction conducted with the intent to steal money, sensitive data, or personal information. This encompasses a variety of scams such as hacking, account takeover, fake transactions, and phishing. The goal is to abuse platforms used for payment processing, steal identities, and illegally automate payments.
The online fraud definition, as outlined by various financial regulatory bodies, involves malicious activities performed over the internet that lead to financial or data theft.
The Reserve Bank of India has launched several awareness initiatives, such as its Cyber Security Walkathon and public campaigns urging users to remain alert, to educate people about phishing, fake customer support, OTP scams, and the importance of timely reporting of fraud cases.
Types of Online Payment Frauds -
Understanding online fraud in India enables businesses and individuals to identify suspicious behaviours before it becomes too late. The following are some of the most emerging types of online scams:
1. Online Phishing:
Cybercriminals use fake websites, emails and SMS messages to illicitly obtain confidential information such as OTPs, passwords, and credit or debit card numbers.
2. Identity Theft:
Fraudsters scan identification and use documents like PAN, Aadhaar and Bank account numbers to impersonate and perpetrate fraud online.
3. Data Theft:
Unauthorised access to personal or corporate databases to obtain sensitive information for future online payment scams.
4. Credit Card Fraud:
Using stolen or skimmed card information to perform fraudulent transactions on e-commerce websites and digital wallets is online transaction fraud.
5. Chargeback Fraud:
Chargeback fraud occurs when a customer falsely disputes a legitimate transaction to secure a refund while keeping the product or service.
6. Business Email Compromise:
This is a type of spear-phishing where attackers pretend to be high-ranking officials of a company and issue instructions to lower-level employees to initiate non-existent transactions.
7. Card-not-present Fraud:
Fraud involving online or phone payments where the physical card is not required.
8. Account Takeover (ATO) Fraud:
Fraudsters assume control of a user’s account and either make payments or switch payment settings.
9. Skimming:
The cloning of card information at ATMs and Point of Sale (POS) terminals for use in unauthorised withdrawals or purchases.
10. Pagejacking:
A fraudulent technique where attackers hijack legitimate web pages and redirect users to malicious websites.
11. Refund Fraud:
Refund fraud happens when fraudsters exploit a company’s refund policy by making false claims, such as requesting refunds without returning the goods or by deliberately damaging items to secure reimbursement.
12. SIM Swap Fraud:
The fraudster obtains a duplicate SIM card by tricking the telecom provider and uses it to receive OTPs and bypass security.
How to Prevent Online Payment Fraud?
Cybersecurity threats are continuous, evolving challenges that require constant vigilance. As a business or individual, implementing strong security measures will drastically reduce the risk of payment fraud, and here is how to stay safe.
1. Authentication Procedures:
Resist unauthorised access with multi-factor authentication (MFA), biometrics, and verification using one-time passwords (OTPs).
2. Educate Employees and Customers:
Public education programs seek to avert online payment fraud by educating users about phishing while browsing and reporting.
3. Monitor Transactions Regularly:
Fraud alerts and audits should be conducted on a patterned basis for online transactional fraud, which estimates potential loss and provides for effective counter-measures.
4. Implement Secure Payment Gateways:
Choose trusted payment gateway providers that use end-to-end encryption, tokenization, and real-time fraud monitoring systems.
5. Access to Sensitive Data:
Restrict access to sensitive payment data and use role-based access controls within organizations.
6. Security Best Practices:
Update software regularly, use secure networks, and deploy firewalls and antivirus solutions.
7. Encrypt Transactions and Emails:
All transactional data and communication must be encrypted to prevent data theft during transit.
8. Avoid paper checks and Invoices:
Prefer secure digital payment methods such as real-time transfers or digital wallets, as paper checks can be intercepted or altered, though they are still widely used in India and globally.
Conclusion
With India embracing a digital-first economy, the risk of online payment fraud will only grow. Understanding the types of online fraud in India, such as phishing, identity theft, or SIM swap, can significantly mitigate risks for individuals and businesses alike.
FAQs?
1. How many types of online payment fraud are there?
There are over 10 common types, including phishing, identity theft, data theft, credit card fraud, and SIM swap fraud.
2. How can fraud be prevented in digital payments?
Use secure payment gateways, enable multi-factor authentication, monitor transactions, and educate users.
3. What is the meaning of digital payment fraud?
It refers to unauthorized or deceptive activities during online financial transactions to steal money or data.
4. Why is Online Payment Fraud a Major Concern for Businesses?
It causes financial losses, damages brand trust, invites legal risks, and affects customer confidence.
