Payment fraud
It is a cybercrime when an individual pays money online (or sells goods or services themselves) to get something in return but receives something of far lesser value or nothing at all.
Online payment fraud simplified
We all like stuff. We like it even more when it’s affordable and of good quality. That’s what online shopping fraudsters look to exploit. They create fake websites with non-existent goods and services to entice us into buying them. The only catch is that once you wire money over to them, you might never see it again.
Types of payment fraud
Non-delivery
Picture this: you scroll online and see a familiar brand ad for a new TV set. You visit the website and find that the prices they offer are 30% lower than any of their competitors. Excited, you decide to throw in an air conditioner as well. You wait a few weeks, but your order never comes. Then you visit the website again, only to find that it’s a fake address run by a scammer. That’s called a non-delivery case.
Non-payment
Non-payment is a different type of payment fraud and it’s the opposite of non-delivery. It happens when someone asks you to ship goods or provide services but never pays you.
Advance fee
Advance fee, like the Nigerian prince scam, is when scammers ask you for money, promising to return more at a later date but never do. Such scams often include fake stories and false investment opportunities like “wire me $400 dollars for plane tickets and I’ll pay you $2,000 when I return.”
Misrepresentation
Misrepresentation is a type of payment fraud when you receive different goods or services than promised. It might be a shirt of wrong material or poorer quality, or a different model smartphone than what you ordered.
Tips to prevent online payment fraud
Remain skeptical
Does the deal sound too good to be true? Then it probably is.Think about it, there really is no reason why any business would sell a good quality item really cheap.
Use ad blockers
Use tools like CleanWeb or other ad blockers. They can help block known malicious ads that target people on the internet with fake promises and too-good-to-be-true deals.
Check the domain
Inspect the website’s domain name for typos and misleading brand naming. Hackers often spoof the website’s names to make them appear legit at the first glance.
Be wary of emails
Don’t open attachments, links, or respond to emails from unknown senders. If anyone you don’t know sends you a file via email, it’s almost guaranteed to be a scam.
Do your research
Ensure you’re purchasing from a reputable source by looking up the vendor online and on other websites. When was the business established? Where? By whom? Who is their statutory agent? And so on.
Pay smart
If you use PayPal for payment, choose the G&S (“Goods or Services”) payment type instead of F&F “Friends and Family” for easier refunds. This way, you can get your money back if you get scammed.
Online payment fraud stats
According to the FBI Internet Crime Reports, here's how devastating online payment frauds were from 2015 to 2022:
Average losses and victim count
year over year
Online payment fraud cases have reached record numbers with 146.2K yearly victims (around 400 victims per day) in 2020.
Victims have reported the highest average financial loss to online payment frauds in 2022 ($6.1K per victim).
During the 2020 COVID-19 pandemic, the number of online payment fraud cases grew by 77%, but the average financial loss fell by 33% (from $3.8K to $2.5K) per victim compared to 2019.
Despite the increasing awareness of online crimes, daily financial losses to online payment frauds have grown around two times from 2015 ($520.6K per day) to 2022 ($1.1M per day).
