Essentials of Online Payment Security and Fraud Prevention
Today’s consumers are utilizing online payments more than ever before. A recent survey by Experian revealed that at the beginning of 2022, 53% of consumers say they increased their online spending (April 2022). In a post-pandemic world, consumers are filling up virtual shopping carts—no sanitization required.
What we are seeing, as a result, is a rise in online payment fraud. E-commerce losses to fraud were estimated at 20 billion U.S. dollars globally in 2021. Now, more than ever, consumers need to recognize the absolute necessity of online payment security.
With hundreds of online merchants to choose from, it can be tough to know who to trust with your personal information.
What can you do as a consumer to ensure online payment security?
Familiarize yourself with the essentials of online payment security and fraud prevention: industry compliance standards, data breaches, fraud tactics, and secure online payment methods to avoid being a victim of fraud.
Businesses big and small are doing their part to ensure consumer payment security. In fact, The Payment Card Industry Security Standards Council (PCI SSC) mandates it.
The PCI Security Standards Council is a global organization whose mission is to enhance global payment account data security. Think of PCI SSC as an essential organization dedicated to developing universal standards of payment security across the globe.
All merchants that store, process, or transmit cardholder data must be PCI compliant, this includes online merchants. Credit card companies then implement these mandates by requiring merchants to achieve and maintain PCI compliance. Without PCI compliance, merchants, and thus consumers, would be left extremely vulnerable to fraud, theft, and data breaches.
PCI Data Security Standards
All merchants that “…accept or process payment cards…” must comply with the standards set forth by the PCI SSC. Doing so helps to maintain consumer confidence and enhances brand loyalty. In order to earn this badge, a merchant must abide by the following requirements.
- Install and maintain a firewall configuration to protect cardholder data
2. Do not use vendor-supplied defaults for system passwords and other security parameters
3. Protect stored cardholder data
4. Encrypt transmission of cardholder data across open, public networks
5. Use and regularly update anti-virus software or programs
6. Develop and maintain secure systems and applications
7. Restrict access to cardholder data by business need-to-know
8. Assign a unique ID to each person with computer access
9. Restrict physical access to cardholder data
10. Track and monitor all access to network resources and cardholder data
11. Regularly test security systems and processes
12. Maintain a policy that addresses information security for employees and contractors
PCI Compliance in Practice
Power players in the e-commerce market often go to great lengths to protect their customer’s sensitive information. However, even going above and beyond set compliance standards does not make a merchant impervious to all instances of fraud.
Advancements in technology contribute to the rapidly changing fraud landscape, and mandates can’t possibly keep up. That said, it is not uncommon for even large merchants to become victims of data breaches.
Data Breaches: A Threat to Online Payment Security
Data breaches are devastating to the reputation of a company. Fraudsters are continuously implementing sophisticated tactics to obtain data and card information.
In September of 2017, Equifax suffered a massive data breach that affected more than 40% of the population of America; highly sensitive data, including credit card numbers, were compromised. This particular breach led to massive losses in unauthorized charges for consumers and merchants across the US.
Victims were encouraged to file claims to offset the costs of hiring legal representation. Ultimately, Equifax paid a settlement of $425 million to those affected. That cost, however, did not cover the headache that comes when dealing with the aftermath of identity theft.
While the payout by Equifax was unprecedented, it's important to note that it is not customary to receive compensation in the event of a data breach. Ultimately the responsibility of protecting sensitive information rests in the hands of the consumer. Arming yourself with the right tools and competencies can be invaluable in reducing your susceptibility to fraud.
The Threat of Online Payment Fraud
As unsettling as it may sound, fraudsters make full-time jobs out of obtaining personal data and developing ways to circumvent the safeguards meant to protect it. Data breaches pose a growing threat to consumers who punch their card information into online checkout forms, often multiple times per day.
It is common for card information to be bought and sold on the dark web in varying capacities. Every time you enter your card details online, you increase the risk of having them intercepted.
There is no short supply of data to be bartered between bad actors. So much in fact, that the going rate for a credit card PAN, expiration, and CVV on the dark web is usually less than $1 USD. More commonly, sensitive data is bought in bulk or “sheets” with some traders including money-back guarantees on the data they sell.
Online payment fraud can feel violating to the consumer, and often leads to an unfortunate upheaval of dozens of online accounts. Shamefully, your credit card information, if compromised and sold, is just a line on a sheet.
How to Ensure Online Payment Security?
There is no one size fits all approach, and new techniques should be employed regularly to keep up with the nature of the fraud industry. Fraud is ultimately an avenue for financial gain, which makes the everyday online shopper an easy target, thus cultivating a secure online footprint is imperative to maintaining your financial health. Now that you have familiarized yourself with compliance standards and the ever-changing fraud landscape, there are various tools you can implement in order to safeguard your personal information. Armed with these essential tools, you can enjoy peace of mind in our digital-first world.
Two Factor Authentication (2FA)
The purpose of 2FA is to act as an additional layer of security on top of the traditional username and password combination. As a general rule, anything that involves a form of currency, like your bank account, should have 2FA enabled.
Accounts that require 2FA are often targeted by fraudsters because they imply that there is something valuable waiting on the other side. So when you have the option to secure your accounts using this method, it's worth taking the extra step to stay protected.
Your middle school lunch number might help you meet the rigorous criteria generally required for passwords, however, it is not the most secure. If you struggle to come up with a password that meets all the criteria, opt for a more secure solution. Abandon your current password and generate one using a password manager instead.
1Password uses a strong master password as a secure way to consolidate your most valuable login credential. 1Password is so secure, that they don’t even have access to your information! 1Password uses several layers of security including encrypting all traffic sent to its server. Additionally, SRP handshake protocol is used to authenticate without sending your account password or Secret Key over the internet, so they can’t be stolen in transit.
Secure Wifi Networks
It may be tempting to use public wifi networks to shop while out and about, however, you may unknowingly expose yourself to fraudsters. If a public wifi network does not require any sort of password, chances are the connection is not secure.
Instead of relying on coffee shop wifi, opt for cellular data to check your bank account balance before online shopping.
What is the Most Secure Online Payment Method?
An excellent method to mitigate the potential damage of compromised card information is to use Merchant-Locked Cards from Privacy.com.
Data is now being stolen in the midst of the payment process. Payment interception is one way a fraudulent party can get ahold of your card information through an illegitimate payment gateway.
Merchant-Locked Cards ensure a breach of one website's data doesn't spell total disaster for all of the cards in your wallet. By design, Merchant Cards lock to the first merchant they’re used at, making them convenient for subscription payments or transactions with merchants who you may be unfamiliar with.
With Privacy Virtual Merchant-Locked Cards you can set spending limits, pause cards between transactions, or close them immediately if a card ends up being compromised.
You can generate Privacy.com virtual cards, which are free for domestic transactions, to use at hundreds of online merchants. Simply copy and paste the card number, expiration, and CVV into a payment field to make payments more secure.
It is quick and easy to set up real-time transaction alerts that send a notification directly to your device when a card or account is used to transact. Not only are these alerts convenient for identifying fraudulent charges, but they can also help keep spending on track. You can set these alerts for transactions over specific amounts, so that you aren’t constantly being notified about buying your morning coffee! In most instances, these alerts are simple and easy to set up and are offered free of charge by your financial institution.
Secure Online Payment Methods In Practice
Now that you have familiarized yourself with the essentials of online payment security and fraud prevention, you can begin implementing them right away. Ensure online payment security by making subtle changes to your online presence and see just how much of an impact can be made on your digital footprint.