Common Card Frauds African Fintechs Should Watch out for in 2022.
Card fraud is estimated to cause at least $408.5 billion loss globally within the next ten years. In the past year only, there has been a 68.4% rise in digital fraud cases in Africa. These rising cases of fraud are due to the increase of digital solutions in Africa and across the entire world which in turn leads to increased opportunities for criminals to commit fraud.
Card fraud causes many problems ranging from loss of finances to loss of organizations. As a result, Startups, both old and emerging, have a strong obligation to prevent fraud as much as possible from occurring to, or through them. Fintech companies whose services include virtual or physical card issuing, card payment processing, or other card-related services have an even higher susceptibility to fraudulent transactions given that 60% of all fraud types are card frauds. Other common types of fraud include lending fraud, BNPL, investment and saving fraud, banking fraud, crypto fraud, etc.
Understanding the different types of fraud is essential so as to enable fintech companies to adequately identify and prevent fraud. As an African Fintech company with services like virtual or physical card issuing, or card payment processing, these are some of the common card frauds that you must be on the lookout for;
Types of Fraud
This is one of the most common fraud types experienced by Fintech companies in Africa. Chargeback fraud is when users intentionally claim to not have received a good or service from a merchant and request a refund. In these cases, fintechs are liable to be multi-charged for transactions. This could lead to a lot of loss for the company. Chargeback frauds in Africa have increased by 65% between 2021 and 2022 alone.
This is when criminals attack your company’s information bank and steal the data and information of your users. With this, they can debit money from users account and also carry out seemingly legitimate transactions not initiated by the actual user. In these types of cases, the financial organization is usually held liable, and this causes trouble not only with your users, but also with regulatory and compliance organizations.
Phishing refers to when fraudsters pretend to be legitimate organizations to get across to your users. Many fintechs respond to complaints digitally via email or social media, this increases the risk of phishing as fraudsters can easily pretend to be your company to unsuspecting users. Successful fraud of this kind can make your users lose the trust of your company and drop off.
This refers to when a person combines legitimate and fake information to create an identity. This way, they have better chances of passing through some KYC procedures without being flagged. However, in the case of fraud, there is no actual legitimate identity to hold responsible. Criminals usually use this to steal funds, carry out fraudulent transactions, or get multiple cards for illegal purposes using your platform.
System Breach Fraud
This is when a fraudster takes advantage of a processing error to carry out multiple transactions. For example, when a user notices that transactions are being multi-processed, they can keep making transactions and receiving 2X worth. This type of fraud is usually the organization's fault and is one of the riskiest fraud types.
This is very similar to synthetic fraud except that it involves real user data for fraudulent activities. Identity fraud occurs when a person uses another person’s identity to process payments and process fraudulent transactions.
To protect against fraud, there are several things organizations must be aware of. First is confirmation of identity by using robust KYC systems that fish out illegitimate information or false identities. For better results, KYC should be a multi-layered approach that blocks all possible touchpoints for fraud. Another essential point for organizations to note is that authentication of identity should not be a one-time thing; even after onboarding users, take out time periodically to check through your user's identity.
Also, transaction monitoring is essential in fraud prevention and detection. When you keep a close eye on transaction types performed by your users, you will quickly be able to identify fraudulent or criminal transactions on your platform and block the user's access. Lastly, compliance with regulatory demands like AML, and PCI-DSS should not be toyed with. These regulations help to protect both your company and your application users from experiencing fraud.
At Bridgecard, we have built a robust and fast system for verification, monitoring, and authentication of users and transactions. This allows Fintechs using our physical cards and virtual dollar card issuing APIs able to take a rest seat knowing that they are properly protected against most types of fraud.
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