Digital Banking Frauds and Tips to be Wary of Them

Posted on: Apr 11, 2024 | 3 mins | Written by: HDFC ERGO Team

Digital Banking Frauds and Tips to be Wary of Them

Whoever said all that is constant is, but change was right! And banking is an example that can prove so brilliantly. We witnessed a remarkable transition from reliance on handwritten documents and personal interactions to the adoption of modern conveniences, such as net banking, credit cards, and UPIs over time. However, with each new technological advancement comes the inevitable discovery of vulnerabilities and weaknesses, thus leading to digital fraud in banking sector. As we embrace innovation, it becomes imperative to remain vigilant, and one way to protect yourself from these flaws is to ensure investing in cyber insurance for continued security and stability.

8 Kinds of Digital Frauds in the Banking Sector

Here are 8 digital banking frauds to be aware of to avoid falling face-first into scams.

1. Phishing and Spear Phishing

No matter how smart you think you are, falling for a con is a risk one will always face. Phishing is a prevalent tactic employed by fraudsters to deceive individuals into divulging sensitive personal information by masquerading deceptive emails as legitimate correspondence from trusted institutions. These emails cunningly request confidential details, such as usernames, passwords, and account numbers. More alarming is the evolution of this scheme into spear phishing, where perpetrators meticulously tailor emails to appear as if originating from familiar sources like colleagues, supervisors, close friends, or relatives. By luring recipients into clicking on attachments or malicious links, fraudsters can gain unfettered access to your bank details.

2. Account Takeover Fraud (ATO)

Account takeover occurs when fraudsters gain unauthorised access to an online account by obtaining stolen credentials through methods such as phishing attacks, credential stuffing, social engineering, data breaches, or exploiting cybersecurity vulnerabilities. Once access is obtained, attackers can change passwords to lock out the legitimate account owner and then proceed to conduct fraudulent activities, including transferring funds to other accounts, making unauthorised payments, or opening new accounts in the victim's name.

3. Wire Transfer, P2P, and e-Transfer Interception Fraud

E-transfer interception Fraud is when cybercriminals divert legitimate e-transfers intended for a particular bank account to their own, exploiting susceptibilities like social engineering, malware, or hacking. Credit card fraud, a prevalent issue, encompasses various methods such as theft, skimming, or obtaining lost card information. Payment fraud via peer-to-peer (P2P) apps like PayPal and Venmo is rapidly increasing, with fraudsters capitalising on gaps in security measures. Wire transfer fraud involves scammers impersonating trusted entities to request fraudulent transfers or intercept legitimate wire instructions. With the growing popularity of online money transfers, these kinds of frauds are escalating, too.

4. Application Fraud

Application fraud involves cybercriminals opening bank accounts or applying for loans and lines of credit in the victim's name without consent, using stolen identities or synthetic IDs. These accounts are then exploited for illegal activities like money laundering and fund transfers. Fraudsters may also build credit over time, max out credit cards without repayment intent, or submit multiple applications to various financial institutions at once, known as "loan stacking." They may also create synthetic identities, mixing real and fake information or providing false details, further enabling this deceitful practice and leading to financial losses and reputational harm for victims and institutions alike.

5. Malware or Fake Apps

Malware is specifically crafted to breach your mobiles or PCs to access your confidential banking data for illicit purposes. Fraudsters can exploit it to acquire individuals' online banking credentials illicitly. Then there are also fake apps, which are counterfeit versions of legitimate banking applications created to imitate the real ones. They trick users into sharing personal information and are typically obtained from unofficial sources, often containing harmful software.

6. SIM Swap

In a SIM swap scenario, the fraudster obtains a new SIM card from the victim's mobile service provider using the victim's registered mobile number. With control over the victim's phone number, the scammer procures unauthorised access to the victim's online banking accounts by bypassing the two-factor authentication. Always report anything that seems out of the blue to the rightful authorities!

7. Employee Initiated Frauds

Cons can come in all forms! Never trust anyone blindly. Employee-initiated fraud involves the staff members of financial institutions abusing their access to confidential data and banking systems for personal benefit. This misconduct can include activities such as embezzlement, insider trading, and various fraudulent actions.

8. Vishing and Smishing

We have all heard of phishing! But have you heard of vishing or smishing? Scammers can also utilise phone calls (vishing) or text messages (smishing) to deceive you into divulging sensitive information, such as login details, passwords, PINs, and personal data. It's crucial to remain cautious and refrain from sharing any personal or banking information over the phone or through text messages, especially when prompted by unsolicited communications.

Tips to Avoid Digital Banking Frauds

With the steady rise of digital frauds in banking sector, it has become a matter of essence that one stays tech-savvy to avoid falling prey to cybercriminals. Here are some tips to prevent you from walking right into a cybercriminal's vicious trap:

• Use strong, unique passwords and update them regularly.

• Activate two-factor authentication for added security.

• Be cautious with emails and links; verify their authenticity before sharing any personal information.

• Keep all software, including antivirus programs, up to date to prevent the exploitation of known vulnerabilities.

• Avoid conducting banking transactions on public wifi networks.

• Monitor bank statements regularly for any unusual activity and report it immediately.

• Stay sceptical of unsolicited calls or messages requesting personal or banking information, as legitimate institutions don't request such details over the phone.

• Invest in cyber insurance for family.

FAQs

1. What is phishing?

Phishing is when fraudsters deceive individuals into divulging sensitive personal information by masquerading deceptive emails as legitimate correspondence. This fraud can also be done via calls or texts.

2. Is it safe to use public wifi?

It is not safe to utilize public wifi. You could end up giving hackers access to sensitive data.

Conclusion

Now that you are aware of the various kinds of digital frauds in the banking sector, always remember to stay vigilant and remember little things matter! Be it logging into a public wifi or clicking on unsolicited links. Your online security matters! Promptly report any malfunction, disruption or loss to necessary authorities. Don't trust people blindly and always trust your instincts!

Disclaimer The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

5+ Common Job Scams & How to Avoid Them!

All You Need to Know About QR Code Scam

What is Email Spoofing & How to Stop Attackers from Posing as You?

How to Protect Yourself as the Threat of Scam Apps Grows?