COVID-19 Increases Exposure to Digital Payments Fraud

With the coronavirus pandemic forcing more consumers to opt for online payment, whether it is for shopping, banking or any other activities, fraudsters, on their part, are hoping to subtly take advantage of the situation.

Almost half of Indian consumers (47%) are seriously concerned about digital payments fraud now than when the novel coronavirus first emerged, according to a new study conducted by YouGov and ACI Worldwide. When using digital payment methods, many of them are also exercising greater caution than ever.

When impacted by fraud, nearly two-thirds of respondents mentioned that they would first call their bank to block their account, indicating that — during this time of heightened awareness — consumers consider their bank the first line of defense. Twelve percent would first report fraud activity to police or a cyber crime unit, while a mere 4% would turn to public social media channels first.

Efforts by Indian authorities to encourage contactless digital payments over cash as a hygiene measure are resonating with consumers — one-third (32%) have increased their usage of digital payments (credit and debit card, mobile wallet and other UPI-based payment methods) due to the push from NPCI, aimed at helping curb the spread of COVID-19. However, one in 10 respondents reported using cash more frequently now.

“The disruption caused by the COVID-19 pandemic provides another opportunity for fraudsters to dupe unsuspecting consumers,” said Kaushik Roy, vice president & country leader – South Asia, ACI Worldwide.

Respondents expressed a high level of familiarity with assorted anti-fraud and security measures deployed by their bank or financial institution. For example, 75% recognize one-time password (OTP) as a key anti-fraud mechanism deployed by their bank and 66% utilize SMS/email notifications on their phone. Additionally, 55% are aware of two-factor authentication as a security measure, the study shows.

“Continued vigilance on the part of banks and their customers is paramount, as fraudsters are constantly evolving their methods — whether its harnessing new technology or adapting ‘social engineering’ tactics — to exploit the disruption,” said Roy.

“Banks can help their customers through both active customer communication and education around fraud risks, as well as taking an enterprise-level, cross-channel approach to fraud prevention,” he added.

Some of the findings of the study include:

Payment behavior and spending patterns

Adoption of digital payments is widespread, with 75 percent using a digital payment method at least once a week and 44% using one almost daily. Only 3% have never utilized a digital payment method and only 7% cited inconvenience (compared to cash) as a major concern when it comes to digital payments.

Limited merchant acceptance was identified as a top concern by only 19 percent (compared to 23% in a similar survey conducted by ACI in October 2019).

Fraud and payments security

Nearly one third (31%) have been a recent victim of card or digital payments fraud or know someone among their immediate family or friends who has. 17% of those occurrences have been within the last month.

Vulnerability to fraud remains the biggest consumer concern when it comes to digital transactions (54%), followed by risk of failed transactions (42%). Insufficient internet connectivity and concerns about data privacy were also cited as significant concerns, by 38% and 36% respectively.

When asked about digital payment fraud risks, fake apps and websites are the biggest, according to 52% of respondents, followed by compromised password/credential information (43%) and spyware/malware (39%).

Card cloning is the most common concern when it comes to debit or credit card fraud, with 1 in 3 (29%) seeing this is as the biggest risk. Approximately 1 in 5 cited stolen/lost cards (22%) or eCommerce/mobile channel fraud (21%) as their top card fraud threat.

Roy noted, it is encouraging that consumers are showing heightened awareness of digital payments fraud and a willingness to adapt behaviors.

“It appears that anti-fraud and security measures implemented by banks are also widely acknowledged and understood, and that banks are still seen as the trusted source of support against fraud,” he concluded.