Social Network Payments - Are we ready?

The next level in payment methods currently being used around the world is on its way. The emergence of social networking sites has led to establishment of a full fledged money exchange system for goods online. It means, real goods can be bought with real money using just your social networking identity, with a single click.

However, while some of the worlds largest social networking sites are busy preparing themselves for a big step into the payments industry, there are a few niggles that still need to be fixed.

Problem areas:

Personal information is loosely available

Getting hold of any sensitive cardholder data is not a tough job for hackers nowadays due to rise in consumer "unawareness" on the internet. Sensitive data like birthdays, last School/University attended, favourite people in the world or favourite books etc. All these information are loosely available on the internet. The problem lies where the Banks and Financial institutions use the exact same information for their account holders to authenticate themselves.

Fraud Market

Its a real market out there. Thieves are making huge earnings by just selling the customer sensitive data online to the fraudsters who use it for their benefit. Users continue to freely post their personal information in the so called private online space. With social networking gathers more pace day-by-day, as far as such frauds groups are concerned, they not only do benefit gathering end user data but can also directly put it to use on the same sites now to steal even more money.

Apps or Trojan?

Free apps are available online in numbers, while end users (tempted to make their lives even more easier) download and install such apps without thinking twice. More often then not the apps are trojans which requests basic user information. These rogue pieces of softwares are nothing but malicious codes that continuously gathers the end user data and transmits them back to the criminals. With the Social media payments becoming more lucrative for such gangs to operate, further rise in crimes involving such groups may become hard to avoid.

User Trust

Companies will have to work towards setting up the most robust security service possible to keep the fraudsters away and gain that priceless trust factor. More attention in terms of security of end users might cost them a little extra bucks, but making the end user feel secured in their payments world would be a battle won for the several players who are trying to earn their way into Social media payments market.

Users acceptance

The end user, should not be underestimated at all while the right payment system is being created. If the payment technique integration does not gel with the applications online, it will quickly put the users off. The companies might want to keep users transition from games/shopping online to a completely different mode for payments as smooth as possible. Any deviation from their purpose online may well create an unhappy mood on the web.

Identity theft

Identity thefts result as more and more consumer details are made public. Consumer buying patterns will have visibility on social networking world with little privacy. As users willingly expose their identities on social networking sites, they are also likely to trust the sites with their card numbers and bank details too. Making it more easy for a fraudster to impersonate as a genuine person online.

Rise in phishing attacks

Phishing attacks may rise as fraudsters try the new avenue to lure the consumers into buying their legitimate ideas. With bank account identity directly linked to a person's social network identity, one ID theft can open several other fraud avenues for hackers.

Experience

Financial institutions worldwide have been trying hard for years now to detect fraud early. That, alongside several other issues involving the whole payment services infrastructure, demands quite a bit of experience in this industry. While social networks might have expertise around consumer behaviour patterns and preferences, charge-backs, reversals, fraud payments and various payments processing overheads are on completely different tracks.

Counteractions:

- Limit the amount allowed to be spent. By setting a clear limit might atleast avoid huge monetary losses to the consumers and financial institutions overall.

- The responsibility also lies with the end user by offering as much less personal details online as possible. The users can definitely play a very important role in industry's surge towards cutting down online fraud. If detecting fraud cannot get any simpler, making it easier for fraudsters is something that atleast can be avoided. No one can be de-linked from the social networking world if he/she does not provide minute by minute details of themselves on the internet.

- A trick can be used by the users themselves by presenting a vague picture rather than precise personal information. Instead of using Mothers maiden name, a pet name can be provided. Authors name can be provided instead of favourite books. Favourite teachers initials can be used instead of exact full name. Using information like which color wallpaper you used on your very first mobile phone is not something that hackers can find out easily online.

- Consumers need to be educated more by the companies on downloading and using apps to their benefit as its clearly not the developers responsibility to do that.

- Regularly checking all the movements on personal accounts. This can definitely help the users to better know their spending patterns while allowing the financial institutions to monitor any suspicious behavior too.

To NFC or not to NFC?

Incorporating NFC technology with mobile phones has resulted in a new alternative payment method which is considered a revolution by some industry analysts. The NFC technology is to be adopted by financial institutions and mobile phone companies together. But many fear being a victims of new wave in payments fraud. While 'Flash phone to pay' idea sounds to be the easiest and the most convenient method till date, there are still a few things to consider from the technology and infrastructure point of view.

Technological considerations:

Near Field Communication (NFC), a wireless technology which allows devices to transfer data from within a short distance, is considered a revolution since it takes just a touch on the reading device to complete the whole payment process. But not everything it touches provides ease and convenience. What if the reader is brought closer to the NFC enabled device to 'steal' data.

- Imagine a small portable skimming device which can fit in a pocket. The fraudsters can steal data by simply brushing past people in crowded places. Sensitive user information can be captured from hundreds and thousands of such compatible devices out there. Any acknowledgment signals like a beep or vibration can easily be worked around by small time hackers.

- Another problem area where a constant threat remains, as with all wireless communications, is exposure to data leakage. Hackers, by means of sniffing the airwaves can track stored cookies and can then easily disguise as a genuine user to steal bank details. Payments fraud cases may rise to a much higher level then what Credit/Debit cards offer at present. A score of customer sensitive information could be available for hackers to misuse them.

- A well known denial of service attack can directly impact the service providers and mobile companies alike. As the end user's lose the trust and patience with the service. Once the NFC enabled device is hacked into, calls or texts can be made unknowingly for the victim. In a variation the calls can also be made to divert from their original destinations. The consumer again, ends up losing from all fronts.

Infrastructural considerations:

Device manufacturers and the financial institutions are well aware that payments with NFC demands a highly secure environment. NFC does offer endless possibilities though. But questions still remain in terms of end user and merchant acceptance alongside many possibilities for  technological glitches and criminal intent.

- For Merchants, its the burden of extra cost involved for deploying compatible cash registers in addition within the current infrastructure built upon Pay by cash and Pay by card systems.

- The consumers are not actually looking for any alternative payment method as such and neither do every single shopper has access to a smart phone.

Considering how many merchants and a few consumers readily adopt mobile payments, the transaction volume will be too low, in turn raising the transaction fees for the merchants and retailers. So, as for the Merchants and Consumers, its a "Who goes first?" situation.

From the payment industry point of view, educating the merchant and consumer communities is a top priority as their behavior is highly susceptible to concerns of security. At present, plastic cards have been working well and NFC is not actually replacing an ineffective system in first place.

The 'Flash phone to pay' idea has enormous market potential, but the payments eco system demands huge developments by the involved parties to be better able to add this incentive into already effective payment infrastructure.

Optimistic about 2010!

While end of year 2008 saw a beginning of a deep recession for several large economies, the year 2009 put the actual effects of recession in place. The financial crisis put a huge pressure on many large organizations around the world. Diminishing consumer demands and extensive liquidity constraints posed a huge challenge for the companies.

With the given challenges, a rise in payment frauds deem inevitable. Several financial reports show huge losses in terms of online fraud for small, medium and large businesses in UK for the year 2009. The Association for Financial Professionals report, dated April 2010, presents some key findings as below:

• Seventy-three percent of organizations experienced attempted or actual payments fraud in 2009.
    - Large organizations were more likely to have experienced payments fraud than were smaller ones. Eighty-one percent of organizations with annual revenues over $1 billion were victims of payments fraud in 2009 compared with 63 percent of organizations with annual revenues under $1 billion.
• Thirty percent of survey respondents report that incidents of fraud increased in 2009 compared to 2008.
• Nine out of ten organizations (90 percent) that experienced attempted or actual payments fraud in 2009 were victims of check fraud. The percentage of organizations affected by payments fraud via other payment methods were:
- ACH debit (25 percent)
- Consumer credit/debit cards (20 percent)
- Corporate/commercial cards (17 percent)
- ACH credits (seven percent)
- Wire transfers (three percent)
• Seventy percent of organizations that were victims of actual and/or attempted payments fraud in 2009 experienced no financial loss from payments fraud.
• Among organizations that did suffer a financial loss resulting from payments fraud in 2009, the typical loss was $17,100.

While the effects of the economic recession on businesses looms ahead, many Merchants have higher expectations from the current year. The businesses are optimistic and prepared to work overtime. The retailers are enthusiastic about expanding their businesses globally and are ready to capitalize on the opportunity. They feel more than ever need for optimising the underlying Payment fraud processes. As online sales grow slowly and steadily, the Merchants continue to face the challenge of keeping online payment frauds to the minimum.

A report from CyberSource found that all businesses were optimistic about increasing their online revenue. The research also presented that online sales is a large proportion of their sales in the small and medium enterprises as compared to the larger firms and are ready to bank on that. The report mentions that 40% of the merchants expected to grow online sales by up to 20%, while 21% expected online sales to be static or to drop.

Though the research shows that 71% of UK consumers are put off by safety issues while shopping online. A quarter believed it was up to the merchants to safeguard their information thus pushing them to undergo massive revamp on the payment fraud prevention front. At the same time businesses would also need to continue to educate the consumers on right measures and best practises that need to be undertaken while shopping online.

"You've won! Give me your Money" Scam

Just deleted yet another email sent to me from clearly a fake email ID. The email said I had won £10,000 in a competition I never entered. Lots of such emails being sent out every second makes me wonder there maybe people out there who are falling victims to such scams.

Its known as an Advance fee fraud. It tricks people in sending money to the imposters in hope of receiving large sums of money in return out of no where. The scammers often use fake email addresses, fake office locations and fake photographs to take the victims into confidence to persuade them to send advance money for "legal" proceedings. The surge in social-networking sites everyday makes it too simple for the fraudsters to procure User details that look genuine to represent themselves.

The scam usually begins with an e-mail which appear to have been sent to a selected recipient but actually sent out to many. Once the victim replies back agreeing to the deal, he/she then receives one or more fake documents bearing some "official" government stamps and seals and signatures making it look authentic. On some occasions the victim is also asked to send sensitive information like full name, birthdate, insurance number and even Bank details. The trick then involves the victim to send money as a fee to take their application forward as processing fee involving large sums of money they have won (not). More "processing" fees and delays follow eventually keeping the hope within the victim alive promising an imminent large money transfer soon. The victims are convinced that the money they are paying will be covered during the payoff - which never happens.

The reason for money not being covered by the payoffs is because the promised winning amount never existed, ever. But by the time victims realize this, they are already short of hundreds or thousands or even millions of Pounds from their bank accounts. Even worse when the money had been borrowed or stolen in hope or greed of getting more money in future. The scammers or the emails or offices are never traceable.

Various other forms of Advance fee fraud exists like, Lottery scam, Charity scams, Fake job letters scams. There are even Fraud recovery scams which targets former victims of such scams.

Emotional, physical and monetary losses to the victims are very hard to gauge. But for the fraudsters even a couple of replies to hundreds of such emails sent around may help them cheat for large sums of money hard earned by the people. But at the same time responsibility lies with the people too, to avoid such scams to loot money from them in broad daylight. As they say, "A little common sense can take you a long way.."

10 Ways to Protect Your Credit Cards

A list of do's and dont's published by the National Check Fraud Center.

You may think these ten rules are unnecessary. But if you ignore them, you make it easy for the wrong people to use your cards

   1. Never leave your cards unattended at work. There are more credit card thefts in the workplace than in any other single location.

   2. If your credit card is programmed to access an Automated Banking Machine (ABM), protect your Personal Identification Number (PIN) or security code. Don't write it down, memorize it.

   3. Don't leave your credit cars in your vehicle. A very high proportion of credit cards are stolen from motor vehicles.

   4. Always check your card when returned to you after a purchase. Make sure it is your card.

   5. When traveling, carry your cards with you or make sure they are in a secure location.

   6. Report lost or stolen cards immediately. Most fraudulent use of cards takes place within days of their being lost or stolen.

   7. Sign the back of a new card as soon you get it. Destroy unwanted cards so no one else can use them.

   8. Make a list of all your cards and their numbers. This key information is helpful when reporting lost or stolen cards.

   9. Always check your monthly statement. Make sure the charges are yours. Report them to your card company if the entry is not yours.

  10. Never give your card number over the phone unless you are dealing with a reputable company. The only time you should give it is when you have called to place an order.