The transformation that online payment has brought to the payment industry is undeniably remarkable. It has made transactions simpler for customers as well as merchants. The digital payment system, however, is also not free from the menace of financial fraud. Merchants looking to create a safe online payment ecosystem for their customers should acquaint themselves with potential financial scams and how to detect and tackle them. 

Here is a peek at some of the common online financial frauds and how merchants can prevent them.

Common Financial Frauds Merchants should be aware of

  • Phishing

It is one of the most common financial frauds in which the miscreants pretend to be an original business and deceive the customer. They contact the customers via SMS, email, or other messaging apps to lure them into sharing their payment credentials, posing as an authentic business. The frauds then acquire and misuse the customers’ sensitive payment information.

  • Synthetic Identity Fraud

It is a type of financial fraud in which the miscreants create a fake identity. They use false or made-up information to create the details of a person that practically doesn’t exist. With these details, they borrow credit which they never repay.

  • Transaction Frauds

Miscreants gain unauthorized access to the bank account of any individual via hacking. The details are used to make payments while the authentic owner remains unaware of the transactions. Upon discovering the unauthorized transactions, the owner reports them and files a chargeback. This can lead to losses for the business as the business is forced to compensate the original owner.

  • Man-in-the-Middle
  • India payment gateway encrypt the user’s data to protect it against such attacks.

How to detect and prevent financial fraud for online payments?

  • Complying with Security Standards

Several security standards lay down some regulations that make digital payments more secure. Examples of such standards are SSL encryption and PCI DSS norms. Merchants must ensure that their payment gateway or link service is compliant with these security standards. Secure gateways encrypt the customer’s personal payment information and tokenize it so that all systems can only access the required part on a need-to-know basis. It is also best to use ‘HTTPS’, the secure version of the ‘HTTP’ communication protocol. An example of an India payment gateway that implements this without any lapse is Zaakpay.

  • Reviewing Statements Regularly

Online payment systems generate automated statements that can be downloaded by the merchant as and when required. The statement is a record of all the details of all the transactions. By analyzing the statement, suspicious transactions can be easily identified. Huge transactions or multiple attempts from one card in a short time frame is a red flag that must not be ignored. That can be an indication of a transaction fraud that may incur the business a chargeback.

  • Securing Admin Access

The admin access to the business website is a gold mine of data that frauds can use to easily deceive the customers of the business. They can get access to the customer database and carry out a phishing attack. They may also gain access to sensitive information of the customers or steal money from the merchant account. To protect against this, a complicated username and password must be used for the admin panel. If multiple employees need access, it is best to limit their access only to the portion of the website that is relevant to them.

  • Using AVS

AVS or Address Verification Service is an additional means to authenticate the online payment by accepting the customer’s address at the time of the payment. It is then verified with the address that is registered with the issuing bank. In case of a discrepancy, the transaction is aborted and prevents synthetic identity fraud and transaction fraud as it denies access to the address.

  • Using Lockout Mechanism

An automated system can protect the business website from DDoS attacks and automatic card number generated attacks. Both these frauds make multiple automated hits to the website using bots. A lockout system can identify such unusually-large traffic coming from one IP address in a short duration and block the requests. 

  • Using Firewalls

Firewalls are systems that don’t allow shady or risky networks to access the business website. It acts as a filter for all the networks trying to access the website, and only trusted ones are allowed to pass through the filter.

  • Customer Sensitization

Customers cannot be expected to know everything about financial fraud prevention. They might end up keeping insecure passwords or keep it logged in insecure wifi. Merchants can use small cues throughout the website to sensitize the customer about financial fraud. With careful customers, frauds can be minimized to a great extent.


The credibility of the business can be severely hampered in case of financial fraud. It can result in loss of sales, damage to reputation, and financial losses. Therefore, it is recommended to put all security measures in place to avoid such unfortunate incidents. India payment gateways like Zaakpay offer robust security measures for online payments and safeguard the merchant’s interest in case of suspicious and fraudulent transactions. It is one of the best solutions for small businesses to offer a secure payments service to their customers.

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