What is Online Transactions Fraud?

Online Transaction Fraud is any type of false or illegal transaction completed by a cybercriminal. The perpetrator deprives the victim of funds, personal property, interest or sensitive information via the Internet.

Online Transaction Fraud is characterized in three ways:

• Fraudulent or unauthorized transactions
• Lost or stolen merchandise
• False requests for a refund, return or bounced checks

Ecommerce businesses rely on electronic transactions to charge customers for products and services. The increased volume of electronic transactions has also resulted in an increase in fraudulent activities.

What types of fraud are there?

There are multiple methods of payment fraud:

• Phishing: Any emails or websites that require personal or private information such as credit card, bank account or login credentials are prone to phishing. If the source is trusted, such as a partner with a bank, the website is trustworthy. However, if the source is unfamiliar, it could indicate an attempt at stealing information.
   
• Identity theft: Identity theft exists outside of the digital realm as well, but it's a common type of fraud online. A cybercriminal who steals personal information and uses it under false pretense is engaging in identity theft. Hackers penetrate firewalls through old security systems or by hijacking login credentials via public Wi-Fi.
   
• Pagejacking: Hackers can reroute traffic from your ecommerce site by hijacking part of it and directing visitors to a different website. The unwanted site may contain potentially malicious material that hackers use to infiltrate a network security system. Ecommerce business owners must be aware of any suspicious online activity in this capacity.
   
• Advanced fee and wire transfer scams: Hackers target credit card users and ecommerce store owners by asking for money in advance in return for a credit card or money at a later date.
   
• Merchant identity fraud: This method involves criminals setting up a merchant account on behalf of a seemingly legitimate business and charging stolen credit cards. The hackers then vanish before the cardholders discover the fraudulent payments and reverse the transactions. When this happens, the payment facilitator is liable for the loss and any additional fees associated with credit card chargebacks.

How does fraud happen?

Fraudsters have become savvy at illegally obtaining information online. Hackers often pose as a legitimate representative and contact credit card owners asking for sensitive information, then use the following means of interaction to steal personal data:

• Email
• Texting malware to smartphones
• Instant messaging
• Rerouting traffic to fraudulent websites
• Phone calls
• Online auctions

Cyberthieves also work in teams to penetrate network security systems by looking for glitches or patches that haven't been updated in a while. These gaps give hackers access around a firewall and make it easy to illegally obtain sensitive information.

Fear of Online Transactions Fraud

An overwhelming 88 per cent Indians are concerned about the security of online financial transactions and at least a quarter refrain from making payments online for fear of fraud, says a survey done by prepaid ecommerce firm ValuAccess.

The survey that covered 3,200 buyers said 47 per cent use their credit card as the preferred mode for payment followed by 34 per cent for cash on delivery and 17 per cent through net banking. Over 60 per cent of the respondents were below 30 years of age and 72 per cent of them were male. Movie tickets and electronics and gadgets was what they bought most online.

There are over 461 million active debit and credit cards in India but the country has one of the lowest card per transaction ratio of 0.1 per month. Effectively, only 1 out of 10 cards is used for an online transaction in a month.

"The fear of it being misused or somebody hacking into the system is a major worry. That is why prepaid cards have a future here," says Gordon who worked in the telecom industry before. "In the US it is used more as gifts as everybody uses cards there. That too will happen in India...it is already happening somewhat in the corporate sector. But first, the growth will be from those who either do not have a card or do not want to use them for fear of fraud."

Chennai And Cyber Crime Victims

Police have advised buyers to be cautious and not get goods without guarantees from sellers.

Online buyers in the city are complaining of being cheated of their money after attempting to purchase goods through classifieds portals including the well-known OLX and Quikr that merely serve as a link between buyer and seller. This kind of fraud is on the rise in the city with 14 cases registered by the police so far this year and more complaints from victims pouring in.

Not all victims might be coming forward to complain, police sources said college student Anandraj. K. Chandran, a native of Chengalpattu, had always longed for an iPhone and when he spotted an attractive discount offer for a 5S handset on www.quikr.com in mid-January, he eagerly contacted the mobile phone number mentioned in the ad. "They offered me a handset for Rs. 20,000 stating that it was part of an Indian Customs seizure. A woman claiming to be a Customs officer called me and spoke in broken English, asking me to deposit the money online.

I deposited a total of Rs. 34,800 in three instalments but I never received the phone," Anandraj said. The youth got the first hint that he had been conned only when the fraudsters asked him to deposit an additional Rs. 50,000 towards the procurement of a so-called anti-terrorism certificate.In another case, civil engineer R. Saravanan from Ramapuram and his friend posted a request on www.olx.in in a quest to buy electronic goods including phones and laptops for low prices.

"A man claiming to be an employee of Chennai Airport contacted us by phone and offered to sell an iPhone, two laptops, including a MacBook, at a meeting on the airport premises. He even sent us an ID card of an airport staff claiming to be his," he added. Two weeks ago, the engineer and his friend made an online transfer of Rs. 1.05 lakh to the bank account based in Pattukkottai given by the fraudster, who subsequently siphoned off the sum. "Shockingly, the culprit attends our phone calls even now and taunts us, saying that the police cannot track him and if he feels pity for us, he may return the money," said Saravanan.

The Central Crime Branch of the city police has formed a special team and begun a probe into escalating fraud on classifieds websites. Police have advised net users to exercise caution while purchasing products online and strictly refrain from making online money transfers without some sort of solid guarantee from sellers.