5 Ways Enterprises Can Stop Common Identity Scams in Payment Systems
Ah, the payment systems – one of the pillars of every business, no matter the size. Sometimes, you just have to describe it as a unique relationship that canâ€™t go on without its partner in crime – and in this particular case, the partner is against the crime.
Regarding this symbiotic relationship between payment systems and security measures, we must mention one of the most potent threats, synthetic identity fraud.
Synthetic identity fraud is a challenge and an increasingly prevalent threat in the realms of enterprise payments – leaving them to face potential financial losses and reputational damage.
All that remains to be seen is whether there is anything we can do about it. For sure, there is. Just follow the right steps in this dancing tutorial against it.
Now, letâ€™s start from the beginning.
What is synthetic identity fraud?
Hey, the tech industry is evolving, and everything with it. Itâ€™s no wonder that synthetic identity fraud has become a major problem for businesses and individuals alike. Just look at whatâ€™s going on with the deep fakes all over the internet.
No need to get paranoid, but you should know that this type of fraud occurs when someone uses a combination of real and fake data to create a new identity – so they can use it to apply for credit or open up new accounts.
But how does it work, and what kind of stolen information is used?
So, as we already said – synthetic identities are created by combining real and fake information to create a new, sophisticated identity. And this is different from traditional identity theft, where criminals can use your real information to commit a scam.
If you are wondering what kind of data is stolen, be aware that it could be anything from your name and date of birth to sensitive information like your social security number or even your mother’s maiden name.
Be careful out there! These synthetic identities are usually created with easily accessible public records, which is why itâ€™s important to keep your personal information private.
Also, criminals can purchase stolen data on the black market. This can also be almost anything, from credit card and bank account numbers to login credentials. Once they have this data, they can use it to commit fraud in your name.
1) Synthetic identity theft detection and protection
Being aware is always a key step in everything you do. Thatâ€™s why youâ€™re reading this article, right? Jokes aside, having your information is serious, and you have to always be aware of the countless possibilities in which it can occur.
But if you donâ€™t want that to happen – having synthetic identity fraud detection as your first line of defense is a must. This is an exciting field that uses advanced data analytics and machine learning algorithms to uncover anomalies linked to fake identities.
By using various data sources and leveraging the same data with cross-referencing detection tools, you can implement strong security measures in your payment system. Also, having some strategies in your pocket could be helpful.
There are a few key strategies you can use to combat synthetic identity fraud:
- Thoroughly reviewing applications and conducting background checks is another method for combating these scams. Just make sure to verify all the information provided. This includes running a credit check and verifying employment history and references.
- Monitor account activity – Once an account has been approved, it is critical to keep an eye on it. Keep an eye out for warning signs, such as large purchases made soon after account approval or a dramatic shift in spending habits. If you have any suspicions, you should get in touch with the customer or even close the account.
Businesses can further mitigate the effects of payment data theft and information theft by taking additional precautions. The way forward is to have already taken the initial steps, such as integrating technology into your company’s payment procedures.
Letâ€™s explore other options as well.
2) Maintain data security solutions for automated decision-making!
If you want to tackle synthetic identity fraud, whatâ€™s the best you can do? Use one highly effective approach to prioritize keeping your data security solutions up to date.
Just like every system needs to be constantly updated, thereâ€™s no reason not to pay attention to your security setup. This includes having top-notch hardware and software systems.
Also, having reliable anti-virus and anti-malware protection is always a must. When youâ€™ve made sure everything works just fine, you donâ€™t have to fear any bugs or lagging in the system.
Automated decision-making systems can be great at helping you identify potential fraud by looking for patterns in the data.
Leveraging real-time data can help you if a system flags a credit card application with a social security number that has been used multiple times with different names and dates of birth, or any potential red flag before the worst happens.
3) Multi-factor authentication
Setting up multi-factor authentication (MFA) is a great way for enterprises to effectively tackle synthetic identity fraud in payment systems.
How? Well, MFA enhances the security of transactions like a superpower by asking users to provide multiple pieces of evidence to confirm their identity. And thatâ€™s how itâ€™s secured an extra layer of protection.
One possibility is to include a one-time code that will be sent to your mobile phone along with your username and password. You know the drill.
Although multi-factor authentication (MFA) may require an additional step during the process of making a payment, it plays a significant role in discouraging criminals from engaging in synthetic identity fraud. Because of this, it is unquestionably important to think about implementing MFA.
4) Know your customer – identification and verification
Well, you want to know with whom youâ€™re doing business. Thatâ€™s completely normal, and you want to trust your customer. This means youâ€™ll have a smooth process in place to identify and verify each customer before they can start using your services.
There are several ways to approach this, but what matters most is finding a system that suits you well and instills confidence in your path to KYC.
Verifying identities is often done by using government-issued ID documents, which is a reliable method. Having the opportunity to include passports, driverâ€™s licenses, or even social security cards is just a simple motion – kindly requesting customers to present these documents.
This is going to bring peace of mind, knowing that they are indeed the individuals they claim to be. You have the option to run checks against public databases to easily confirm identity information.
By implementing more stringent KYC protocols, you can ensure that only authentic customers are granted access to payment systems. As a result, the possibility of fraud is significantly decreased, allowing you to save some nerves.
5) Know your employees!
Empower your staff with the knowledge to recognize and address potentially risky behavior. Itâ€™s simple; just try to grow awareness of synthetic identity fraud as one of the emerging types of financial crime around your team.
If you know your employees and their abilities – you can show them your trust by enabling an education course or training on the potential payment risks.
Even though detecting this type of fraud can be challenging, businesses can keep an eye out for certain indicators that may help them identify potential synthetic identities.
It is a good idea to have workers on the lookout for applicants who might not have a long credit history but who are eager to open multiple new accounts or lines of credit or who want increased credit limits on their existing accounts.
Allowing your employees to verify or conduct a background check on customers by using their social security numbers with the assistance of public records is an excellent option.
And all you need to do – is to educate and empower your employees to do that, so you can ensure the safety of the payment systems.
You can stop the fraud!
It was mentioned at the beginning of this article that there is a connection between payment systems and security measures. As Sade would say, “No Ordinary Love,” really is not an ordinary love at all. There are so many aspects you should always be aware of, and the new ones just keep coming.
But with the scams, thefts, frauds, and other criminal activities – there are also security implementations that are accurate and, above else – effective.
Having the ability to identify fraudulent activity in its earlier stages is undeniably advantageous, and you are already one step closer to achieving this goal. Take the advice into consideration and activate fraud detection systems, utilize customer data authentication, deploy machine learning algorithms, and consistently monitor payment transactions.
You can lessen the likelihood of any adverse outcomes and protect your company from any potential damage – just go for it!