Imagine your Fintech organization is about to finalize a deal with a new contractor. Moments before the payment is due, the CFO receives an urgent email from the contractor requesting the funds be sent to a new account with references and contract details that appear to be authentic. Deeming the request credible, your CFO authorizes a $100,000 wire transfer.
A few days later, the original contractor follows up on what prompted the delay in payment. Only then did you realize a scammer impersonated the contractor using a phony web address, and your company became a victim of Authorized Push Payment (APP) Fraud.
APP fraud has become a central threat to the evolution of digital-first enterprises. Globally, the cumulative monetary loss from APP scams across top markets is projected to reach $6.8 billion by 2027.
How can digitally inclined organizations steer clear of APP attacks? In this article, you’ll discover how severe these attacks can be and practical tips to protect your business and clients alike.
APP scam prevention for high-tech firms
As digital-first companies require smooth payment systems to enhance business transactions, the abrupt escalation of APP threats emphasizes the prompt need for authorized push payment fraud prevention protocols, especially now that hackers are as elusive as ever, upgrading their schemes to ensure they’re always one step ahead.
These security measures should comprise modern technologies capable of detecting and blocking malicious activities. Since the attack is perpetrated using deceptive means, awareness programs should be staged to educate your customers and team on common scam patterns.
How APP scams impact digital-first organizations?
For digitally inclined firms, successful APP attacks cause more than financial losses. They can dent a business reputation, lead to customer churn, and result in regulatory inspections from governmental bodies, all of which hinder company growth and long-term success. Read on to learn more about the dangers of APP fraud.
Internal monetary damage
Financial loss is one of the most devastating impacts of APP fraud. What makes it more perplexing is that companies, particularly financial enterprises, are usually obliged to make refunds due to moral and competitive reasons, even when customers are the victims of such scams.
The situation becomes heightened if the fraud is perpetrated using a firm’s platform. It brings about the involvement of financial regulators and lobbying organizations who clamor for the restitution of stolen funds.
And oftentimes, cybercriminals aim at senior employees, particularly those who handle payment transactions. When hackers infiltrate business contracts or proceedings, they can do away with a considerable amount of money, which can cause internal financial damage.
In cases where APP scams become persistent, they weaken an organization’s financial might, and without necessary cybersecurity measures, it could lead to bankruptcy.
Reputational damage and loss of credibility
Brand perception takes precedence in the digital landscape. However, one case of APP fraud is sufficient to break years of customer trust and loyalty. While companies may not be legally accountable for the scam, customers attribute instances of forgery to platform insecurity.
In this digital era, where sensitive issues like fraud cases are escalated on the internet and social media, firms are often met with repulsive remarks and complaints from all directions. Scenarios like this taint a company’s image and cause businesses to lose credibility.
Brand reputation transcends how customers perceive your organization. Your investors, partners, and stakeholders may terminate their agreements should your company receive negative publicity due to cyber threats like the APP scam.
Regulatory audit from governmental agencies
Companies affected by cyber attacks, like APP fraud, face severe scrutiny from financial regulators globally. The situation is more intense for US-based digital-first firms as the CFPB agency and other state regulators push involved organizations to make mandatory reimbursements, regardless of whether the customer was tricked into making the transfer or not.
Regulators also push for broader investigations, especially when Fintechs are the victim. They can expose them to legislative frameworks to find out if the involved firm is legally compliant; otherwise, they have to pay fines and face legal action.
Depending on the severity of the crime, regulators may impose compliance policies on customer verification, transaction screening, and anti-money laundering.
The involvement of finance regulators in business operations can be demeaning—being labeled publicly as an organization with a derelict attitude towards fraud can cause serious reputational damage.
Heightened cost of operations
As fraud tactics evolve, newer and more sophisticated detection tools have been designed to counter APP scams—implying that digital-first companies must allocate significant budgets for these technologies and training programs.
Likewise, companies require dedicated investigation teams and customer support to handle cyber attacks proactively and with the utmost efficiency. And since hackers evolve and develop new strategies for committing fraud, organizations must have significant investments in education and cybersecurity.
These security upgrades are usually expensive, particularly for startups and SMBs who struggle to maintain their financial might. Now that the digital space has become oversaturated, companies without high-security practices may lose their customers to rivals should there be a cyberattack.
Interference with customer experience and retention
Every organization strives to enhance user experience by ensuring its website and applications are intuitive and user-friendly. However, APP scams can cause user friction as companies try to improve security standards by introducing extra layers of authentication or transaction delays.
Many organizations make the mistake of lengthening the verification steps and making them repetitive to such an extent that they negatively interfere with the user journey.
Experiences like this cause customer frustrations and app deletion. And yet again, customers may feel insecure when they do not see or understand the nature of your security protocols.
As a digital-first firm, it’s expedient to strike a middle course when upgrading your security tactics to protect customer trust and facilitate retention. However, a poor UX in either direction can force customers to seek alternative platforms with seamless and secure experiences.
How to safeguard your organization from APP fraud attacks?
An APP scam is primarily based on manipulation. Fraudsters trick potential victims into making wire transfers to new accounts while acting as the original recipient. If you want to secure your digital-first enterprise from this threat, here are a few steps to follow;
Add extra customer verification layers
Multifactor authentication (MFA) can work magic to secure user logins or important activities like payment initiation and sensitive information changes.
Instead of boring customers with inputting lengthy details like personal home address, you can have them input something only they’re familiar with, such as a password or PIN.
The experience can be seamless and swifter with biometrics (fingerprints) or modern technologies like voice and facial recognition. Simply have your developers integrate these protocols into the user journey to minimize friction.
Incorporate the latest fraud detection software
Modern detection systems operate on AI algorithms and machine learning, allowing you to keep track of user behavior and transactions to detect malicious activities in real-time.
ML helps you detect suspicious activities like user logins from unusual locations or devices, transfers to new accounts, or PIN and password change requests.
Fraud detection software evolves with the user’s browsing history and transactional patterns, and when it detects a fishy activity, it can proactively request an additional layer of verification to prevent possible threats.
Stage awareness programs
Customer enlightenment can help minimize the risks of APP scams. After all, fraud is dependent on social engineering and trickery.
Digital-first companies can educate customers using media like blogs, email, and in-app notifications on the common ways fraudsters perpetrate scams, like impersonation, phishing, and more.
When you enlighten customers on various scamming techniques, you demonstrate how much you take customer safety seriously, reducing the risks of APP scams and building a loyal customer pipeline.
Build a rapid, reliable anti-fraud response team
In a scenario where a successful APP scam is reported, your response team should proactively take action to investigate and track down the culprit to reverse the payment or freeze the account to prevent further transactions.
A reliable anti-fraud team should encompass highly skilled personnel who are experts in collecting relevant information and detecting patterns in real-time. They should have high-level communication skills to interact with victims, a show of empathy and clarity.
Oftentimes, customers who fall victim to APP scams tend to be in a confused and agitated state when reporting the incident, so it takes expertise and high-level composure to reassure clients and reinforce your brand’s reliability.
Future-proof your digital-first enterprise against APP fraud
It’s no news that fraudsters are working around the clock to ensure they outsmart all security measures designed to counter APP attacks. You must equally be relentless in upgrading your defense.
Keep your eyes peeled for the latest anti-fraud technologies and strategically implement the security tips highlighted in this piece. Many digital-first firms that have been victims of APP scams have found it difficult to recover from the aftermath, so your security protocols should leave no room for any form of cyber attack.
Rilwan Kazeem is a creative writer and art lover. He has worked in social media, content marketing, and SEO for four years. He has covered topics including digital marketing, HR, emerging technologies, and their intersection with business. At his leisure, he loves to meditate and spend time with his family.
