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Top 3 Online Payment Frauds and How to Avoid Them

Avoid Online Fraud

“Technology is moving at a much faster clip than our laws can keep up with.” – Deborah Hersman

Fraudulent activities involving online payments still remain a threat to e-commerce. Over the years, the evolution of scams and fraudulent schemes has drastically affected the operation of online businesses.

What is an online payment fraud?

Online payment fraud is a criminal act of deception intended for personal or financial gain. Individuals with criminal minds use the ever-growing advantages of the internet to execute these fraudulent activities.

It can be quite scary to dip one’s toes into the world of online business or e-commerce, especially with the threat of numerous payment scams lurking around the unseen corners of the internet. But, as with all other problems and difficulties encountered when running a business, online payment frauds can be prevented with the right countermeasures. One of the best countermeasures is knowing what these frauds are and how each is being executed.

Today, there are a few methods that are quite prominent and executed by most cyberthieves across the globe. These methods have been costing merchants, clients, and even the global economy billions of dollars on an annual basis.

Enumerated below are three of the most notorious types of online payment frauds, along with tips on how online business owners can build effective protection against these deceitful strategies.


Criminals have never been so crafty when it comes to mimicking one’s persona.

Identity theft is one of the most common forms of fraud both in the real and virtual world. It is the driving force behind phishing and account theft. In this regard, credit cards, as well as any other payment vehicles, are of great value to criminals.

Over the years, identity thieves have gathered more information and devised newer, sneakier ways to steal personal information from unsuspecting users and sellers. A very good example of this is a method called pharming.

Although phishing and pharming share the same premises, these two differ in terms of execution.

Phishing usually involves sending an email that appears to be from a company or brand that the unsuspecting client has already been doing business with. A phishing email will usually seem like the real deal, making it easier to instruct its victims to log in to their accounts. What users or clients don’t realize is that they are, in truth, being redirected to a website created to mimic the layout and design of the original website. Since the mock website looks authentic, clients will readily enter their username and password, unaware that what they are really doing is giving away their personal account details.

Pharming, on the other hand, can take place even if the client is browsing a legitimate website without being redirected via a link sent through or attached in an email. This method is done by breaching the security protocols of a particular website and hijacking the intended site’s Domain Name System [DNS] server. This results in clients being redirected to a different website that, similar to phishing, replicates the very structure and appearance of the authentic website. Once users or clients visit the fake website, that is when hackers capture the client’s username and password. The moment identity thieves and hackers gain access to a user’s account, they now have the power to use the account as they see fit. Common aftermath of pharming and phishing includes draining credit card balances, making highly expensive purchases using the victim’s account and even forging legal documents using the victim’s identifications to authenticate the fake papers.

Always keep in mind that these fraudulent activities are not only limited to individuals. Even companies and businesses can fall prey to identity theft.

How to Avoid Identity Theft and Pharming?
  • Always have an updated and trusted antivirus and security software to keep files and computer units protected
  • Check website’s spelling, URL, Certificate and HTTP Address for any unusual detail or pattern not usually seen in the original site URL
  • Freeze credit
  • Look for the padlock icon at the top left of the search bar, right beside the first letter of the website’s URL.
  • Use strong passwords, preferably long ones with a combination of letters, numbers and alphanumeric characters


This is what online business owners and customers call the epitome of irony. Unlike what the name suggests, clean fraud has nothing to do with not causing financial harm to merchants and clients at all!

What is clean fraud?

Clean fraud is a very unique method of fraud. Why? Cyberthieves use real customer data and identity to execute the crime. Fraudsters get hold of the unsuspecting client’s details by convincing the cardholder to purchase items or complete transactions on a fake website.

Some might argue that with today’s technological advancements, merchants should have fortified their websites with ample protection against identity thieves, skimmed credit cards and other forms of security breaches. However, clean fraud can be extremely difficult to detect.

Clean fraud solely relies on cloaking its real intent with stolen data, making it invisible to the normal structure and system that passes the security measures of fraud detectors and antivirus software.

How to prevent Clean Fraud?
  • As mentioned above, clean fraud is very hard to detect. That doesn’t mean that it is something impossible to prevent. There are no shortcuts in preventing or avoiding this type of online threat. Clean Fraud Prevention requires heaps of up-to-date, multi-layered fraud prevention solutions. This may include data analysis, AI, IP analysis and biometric authentication, to name some.
  • In addition to this, knowing where and when clean fraud commonly takes place gives another layer of preventive measures that help fight and prevent clean fraud.


This form of fraud requires 3 fundamental pillars for cyberthieves to be able to execute it properly. Hence the name, TRIANGULATION FRAUD.

How does the Triangulation Fraud work?

Firstly, criminals will create a fake online shop or storefront wherein the criminals will claim to sell high-target items at a very cheap price. These low-cost items will act as bait to unsuspecting customers. Unsuspecting customers will willingly provide their personal or account information to purchase the fake, discounted item.

Next, criminals will use the stolen information to make a purchase online and have the order delivered to the original card owner. In a worst-case scenario, criminals can use the stolen information to make additional purchases.

The mere fact that these fraudulent transactions take place in a legitimate-looking storefront leaves the fraudulent act concealed and undetected for weeks or even months. Only when customers finally notice unauthorized transactions using their account, do they bring up the matter to the proper authorities.

How to prevent Triangulation Fraud?
  • Research about the seller or online store where the desired item will be purchased. The more information gathered, the more helpful it can be even to future customers.
  • Connect and collaborate with online communities dedicated to e-commerce and online businesses. Teaming up with the developers in the digital marketplace help uncover any succeeding purchases that may be part of a scam and help identify fraudulent sellers.
  • Focus on the list of products offered by the seller. These products will be sold continuously until the employer replenishes it with new supplies. By carefully analyzing orders at the product level, customers can even be able to track and map out a pattern that will nullify any fraudulent attempt of cyberthieves.

Online payment fraud is a recurring threat especially in the world of digitally-driven markets and businesses. At the same time, hackers, scammers, and fraudsters are becoming sneakier and more creative with how they execute their deceptive rackets. Putting an effective stop to online threats like online payment fraud requires a series of systematic solutions. Aside from acquiring advanced anti-fraud technology to fortify user safety, updating one’s knowledge about these scams help keep customers and sellers better equipped against digital extortion. This way, spotting the vulnerability of one deceitful schemes pillar will be the key to identifying modified forms of online scams. 

You might also like: 5 Amazing Tips For Your Credit Card Safety

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