Online banking fraud

Entersekt | Encyclopedia | Online banking fraud
What is online banking fraud?

Online banking fraud refers to instances when fraudsters use digital channels to target customers’ online banking accounts and transactions. As banking technology advances, fraudsters are given more opportunities to take advantage of security weaknesses and devise new online banking fraud tactics accordingly. For example, the increase in popularity of faster payments has meant a parallel rise in faster payment fraud.

What are the main types of online banking fraud?

A few common online banking fraud schemes include:

  • Phishing: Fraudsters acquire sensitive information such as login credentials via emails or fake websites by pretending to be a trusted entity.
  • Account takeover fraud (ATO): When fraudsters gain unauthorized access to customers online banking accounts, typically through stolen credentials or weak authentication measures.
  • Authorized push payment fraud: A type of electronic payment where the payer is manipulated into authorizing a transfer of funds from their account to another account, typically through digital banking or a mobile banking app.
  • Card-not-present fraud: When a fraudster conducts illegal transactions without physically presenting the payment card, usually in online or phone-based transactions.
  • Man-in-the-middle attack: An attacker intercepts and relays communication between two parties without their knowledge, potentially stealing sensitive information from banking customers.
  • Social engineering: When attackers manipulate individuals into revealing sensitive information or performing actions that compromise their security.

How FIs can arm themselves against online banking fraud

To reduce the risk of online banking fraud, FIs should implement multi-factor authentication (MFA). MFA adds additional layers of security by requiring users to provide at least three factors of authentication before accessing their online banking accounts. By combining factors such as passwords, biometrics, or one-time PIN codes, financial institutions can reduce the risk of unauthorized access.

Another way to protect customers from online banking fraud is collaborating with industry stakeholders to share trends, ideas, and best practices, thereby fostering innovation in fraud prevention.

Additional resources:


Online baking fraud | Biometric authentication | Fraud prevention