Risk of E-payment


RISK OF E PAYMENTS

1. From Customer's Perspective:
  • Stolen Payment credentials and passwords.
  • Dishonest merchants for financial service providers.
  • Disputes over quality of services and products.

    Fraud
    • Electronic payment systems are prone to fraud. The payment is done usually after keying in a password and sometimes answering security questions. There is no way of verifying the true identity of the maker of the transaction. As long as the password and security questions are correct, the system assumes the right person. If this information falls into the possession of fraudsters, then they can defraud the money.

    Impulse Buying

    • Electronic payment systems encourage impulse buying, especially online and customers are likely to make a decision to purchase an item they find on sale online,because it will cost just a click to buy it through credit card. 
      Impulse buying leads to disorganized budgets and is one of the disadvantages of electronic payment systems.

2. From Merchant's Perspective:
  • Forget payment.
  • Insufficient funds in customers account.
  • Slow Financial service providers.

3. From Financial Service Providers Perspective:
  • Stolen customer or service credentials.

Tax Evasion

  • Businesses are required by law to provide records of their financial transactions to the government so that their tax compliance can be verified. Electronic payment however can frustrate the efforts of tax collection. Unless a business discloses the various electronic payments it has made or received over the tax period, the government may not know the truth, which could cause tax evasion.

Payment Conflict


  • Payment conflicts often arise because the payments are not done manually but by an automated system that can cause errors. This is especially common when payment is done on a regular basis to many recipients. If you do not check your pay slip at the end of every pay period, for instance, then you might end up with a conflict due to these technical glitches, or anomalies.




MEASURES TO REDUCE E PAYMENT RISK

1. Achieve and maintain PCI Compliance.
  • The Payment Card Industry’s Data Security Standard (PCI DSS) is a set of standards and requirements to help ensure that all online merchants and their customers are protected from fraud and data breaches. Achieving and maintaining your compliance via the PCI Compliance Guide is a critical first step to protecting your eCommerce business. In fact, failing to maintain compliance could result in hefty fines — and could ultimately result in loss of services from reputable eCommerce vendors.

2. Recognize signs of suspicious activity.
  • Unusually large orders or high-priced orders
  • Expedited shipping on large quantities or high-priced orders
  • Expedited shipping when billing and shipping addresses differ
  • Orders where the purchaser asks to pick up the order at your location
  • Fake phone numbers (e.g. 555-987-6543)
  • Suspect email addresses (e.g. 1234XYZ@gmail.com, or addresses that seem like randomly generated combinations of numbers and letters)
  • Inconsistent address information (e.g. zip code doesn’t match state or city)


3. USE SET

  • Secure Electronic Transaction (SET) was a communications protocol standard for securing credit card transactions over insecure networks, specifically, the Internet.
  • It was supported initially by Mastercard, Visa, Microsoft, Netscape, and others. 
  • With SET, a user is given an electronic wallet (digital certificate) and a transaction is conducted and verified using a combination of digital certificates and digital signatures among the purchaser, a merchant, and the purchaser's bank in a way that ensures privacy and confidentiality. 
  • SET makes use of Netscape's Secure Sockets Layer (SSL), Microsoft's Secure Transaction Technology (STT), and Terisa System's Secure Hypertext Transfer Protocol (S-HTTP). SET uses some but not all aspects of a public key infrastructure (PKI).



4. AVS: 
  • Address Verification System is an automated fraud prevention method used to reduce the risk for merchants selling in the “card-not-present” – e. g. online or telephone purchase – environment. AVS checks the billing address listed in the transaction against any other address registered with the issuing bank. Merchants should request both billing and shipping addresses of the consumer so an AVS check can be conducted before a transaction is processed.

5. CVV: 
  • Card Verification Value is the three-digit security code printed on the back of the credit or debit card (in the case of American Express, four digits on the card front). It is not stored in the magnetic strip or embossed on the card, so it can’t be as easily retrieved by thieves unless the card is in their possession. Visa calls it a CVV2, MasterCard calls it a CVC2, and American Express calls it CID. 

6.Geolocation by IP Address: 
  • This can help to identify the consumer’s precise location or determine the distance between billing address of the person who is paying for the product and actual location of the person who is placing the online order. Thus, it acts as an additional verification measure or authentication for transactions that have a significant distance discrepancy. Geolocation technology provides information that assistance online business owners conclude which transactions to look deeply into and which to clear. This leads to an even balance between the risks of losses due to fraudulent activity and the risk of preventing legitimate customers from completing their purchases.