Technology continuously evolves to help make day-to-day life easier. In the payment and financial services sector, further innovations are conducted to offer faster and more convenient transactions. However, as services become more advanced, so do fraudsters. It is the responsibility of organizations and service providers to prevent or fight these frauds. Ensuring strong cyber security will help ensure that the trust of customers will not be jeopardized.
Types of Authentication Fraud
You may have heard of malware, data breaches, and social engineering. All of these may happen to companies. That is why you may have put into place cyber security.
Despite this, vulnerabilities to other fraud attacks may still be present. Awareness and preparation are keys to better protection.
Generally, there are two types of authentication. These are the New Account Fraud (NAF) and Account Takeover(ATO).
New Account Fraud (NAF)
As the name suggests, NAF happens when fraudsters open new individual accounts. In some cases, they may also use automated scripts to open hundreds of accounts to attack multiple institutions at the same time. It refers to transactions targeting multiple payment accounts through either mobile or digital channels.
While some may use a stolen identity for fraud, many also use a synthetic identity. That is when fraudsters fabricate a person or an entity. It can be accomplished in three ways. First, they create a completely fictitious identity. Second, they manipulate an identity by modifying real personally identifiable information (PII). This includes email address, name, and date of birth. Third, they combine real and fabricated PII to create the identity.
Once they established an identity, they will start building credit by applying for a bank account or credit card. Due to a supposed existence of an identity, they will be able to bypass the identity and verification process.s They will then use the credit card or bank account for fraudulent payments.
Account Takeover (ATO)
The second type of authentication fraud is ATO. It occurs when fraudsters use existing credentials, usernames, passwords, or PII to access a legitimate financial service or institution.
There are many ways ATO attacks can happen. In some cases, the fraudsters harvest personal data to prepare for fraudulent transactions. They use these for targeted phishing campaigns. Some use automated attacks or combinations of different credentials to gain unauthorized access to their target accounts.
Cyber security has become an important aspect of protecting financial institutions, service providers, and clients. However, some may have weak measures like static passwords or relying too much on PII. Using multifactor authentication, including device recognition and other behavioral tools can help block malicious activities.