# Combating payment fraud in the era of contactless everything Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-07-25 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Contactless Payment Fraud: Protecting Customers in the Meta Description: Find out how fraudsters are taking advantage of vulnerabilities in contactless payment security infrastructure and what banks can do to protect their customers. URL: https://financedigest.com/combating-payment-fraud-in-the-era-of-contactless-everythinghtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/graphicstock-businessman-hand-using-smart-phonemobile-payments-online-shoppingseleted-sbi-301990207-1-1736815545932-compressed.jpg) ![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/andy-renshaw-450x606-1736815545921-compressed.jpg) _By_ **_Andy Renshaw,_** _SVP product management at_ [_Feedzai_](http://www.feedzai.com) The pandemic without a doubt sped up the adoption of contactless payments, but the popularity was on the up even before many shops made it a requirement. The quick implementation, however, has left vulnerabilities within the security infrastructure designed to protect it. While [contactless payments – where personal payment information is stored on cards](https://www.financedigest.com/should-we-be-more-cautious-about-contactless-1-in-4-young-adults-with-contactless-cards-say-theyve-increased-their-spending.html "Should we be more cautious about contactless? 1 in 4 young adults with contactless cards say they’ve increased their spending") or on devices – are convenient, quick, and clean, it is also new, and newly adopted on a wide scale. And new tech always has its weaknesses. In the [early stages](https://www.financedigest.com/valuing-your-early-stage-startup.html "Valuing your Early Stage Startup") of a new piece of technology, there will always be threat actors jumping on the opportunity to steal and to profit from the initial gaps (or, in some cases, gaping holes) in its security. Utilising RFID (Radio-Frequency Identification) technology that has become commonplace in our culture since the onset of the Covid-19 pandemic and the shift [toward digitalisation](https://www.financedigest.com/the-journey-towards-a-digital-bank-five-major-stages-to-successful-banking-digitalisation.html "THE JOURNEY TOWARDS A DIGITAL BANK – FIVE MAJOR STAGES TO SUCCESSFUL BANKING DIGITALISATION"), fraudsters can easily take advantage of everyday consumers and their contactless, yet critical, information. According to Feedzai’s Financial Crime report from [2019 to 2021](https://feedzai.com/blog/q2-2022-financial-crime-report-the-riskops-age/), there was a 65% increase in the number of online transactions, and a 75% decrease in the number of cash withdrawals in the US. During the same period, there was a 233% increase in [fraud attack rate and a 794% increase in fraud for digital](https://www.financedigest.com/fraud-in-a-mobile-digital-world.html "FRAUD IN A MOBILE DIGITAL WORLD") entertainment transactions. What a difference! Like in many sectors affected by cybercrime, the threat actors are seemingly one (or in this case, many) steps ahead of the rest of us. With only a basic understanding of code and a willingness to venture into the dark side of the internet, a fraudster has ample [opportunity to attack banking](https://www.financedigest.com/uk-retail-banks-is-irrelevance-curtailing-opportunity.html "UK Retail Banks: Is Irrelevance Curtailing Opportunity?") customers on a large scale. And because of the instantaneous nature of real-time [digital payments](https://www.financedigest.com/can-i-please-speak-to-someone-why-building-relationships-is-still-crucial-in-digital-payments.html "“Can I please speak to someone?” Why building relationships is still crucial in digital payments"), customers may not be aware of suspicious transactions until it is much too late. The fraudsters are just that quick, and [banks can struggle](https://www.financedigest.com/uk-banks-and-insurers-told-to-step-up-help-for-struggling-customers.html "UK banks and insurers told to step up help for struggling customers") to keep up What can banks do, then, to [protect their customers](https://www.financedigest.com/id-fraud-is-on-the-rise-can-financial-services-do-more-to-protect-their-customers.html "ID fraud is on the rise: can financial services do more to protect their customers?") against these fraudsters? Traditional [fraud detection](https://www.financedigest.com/the-clues-to-detecting-fraud-are-hidden-in-relationships.html "THE CLUES TO DETECTING FRAUD ARE HIDDEN IN RELATIONSHIPS") is all well and good, but it is just not enough anymore to keep up with the swift attacks that are now easily occurring through transactions of the contactless variety. Besides, despite the quick adoption of this technology, [customers are still approaching this wave of digitalisation in the marketplace in a range of ways](https://www.financedigest.com/customer-engagement-whos-leading-the-way.html "Customer engagement – who’s leading the way?"). For example, some [customers are uncomfortable with contactless methods of payment](https://www.financedigest.com/2019-year-customers-take-control-payments.html "2019: The year customers take control of payments"), and so provide their own protection by either refraining from using it, or by setting low contactless limits for themselves, meaning that fraudsters are limited in the amount they can steal. Other customers [value efficiency and therefore have _higher_ limits and use contactless payments](https://www.financedigest.com/2021-predictions-realising-the-value-of-payments-transformation.html "2021 Predictions: Realising the Value of Payments Transformation") more casually. This second group is the one banks might need to focus more of their [fraud protection](https://www.financedigest.com/protect-your-organisation-from-fraud.html "Protect your organisation from fraud") efforts on. **Limiting** [contactless payment fraud](https://www.financedigest.com/the-importance-of-a-proactive-and-collaborative-approach-to-reducing-contactless-fraud.html "THE IMPORTANCE OF A PROACTIVE AND COLLABORATIVE APPROACH TO REDUCING CONTACTLESS FRAUD") Two-factor authentication (2FA) is one method banks can use to limit fraud and it has been shown by Google Security research to be quite effective at stopping 100% of automated bot account takeover attacks, but there is still a concern that 2FA implemented into contactless [payment processes](https://www.financedigest.com/are-your-payment-processes-in-cheque-for-the-new-legislation.html "ARE YOUR PAYMENT PROCESSES IN CHEQUE FOR THE NEW LEGISLATION?") might also negatively affect the customer experience. If each time a [customer goes to use a contactless payment](https://www.financedigest.com/curating-a-fully-contactless-customer-experience-for-payments.html "Curating A Fully Contactless Customer Experience for Payments "), he/she must also validate the purchase, this may then negate the whole purpose of using contactless payment as an efficiency in the first place. While two-factor authentication will [appeal to more conservative and cautious users of contactless](https://www.financedigest.com/wallace-gromits-grand-appeal-goes-contactless-with-creditcall-and-payter.html "Wallace & Gromit’s Grand Appeal Goes Contactless with Creditcall and Payter") pay, it will conversely repel those who want a quick and easy transaction. Of course, it is possible for 2FA and [payment both to be consolidated onto a single device](https://www.financedigest.com/emvco-streamlines-approval-process-for-mobile-payment-devices.html "EMVCo Streamlines Approval Process for Mobile Payment Devices"), but a layer of friction for the user is still added. And friction for that second [group of customers](https://www.financedigest.com/uk-banking-group-strengthens-customer-data-security-ahead-of-gdpr.html "UK BANKING GROUP STRENGTHENS CUSTOMER DATA SECURITY AHEAD OF GDPR") is unwanted. The line between [security and efficiency is one that banks must](https://www.financedigest.com/fintechs-must-remove-security-and-compliance-friction-to-unlock-new-growth.html "Fintechs Must Remove Security and Compliance Friction to Unlock New Growth") toe carefully. If some customers prefer one thing, and others another, how do [banks decide](https://www.financedigest.com/getting-out-of-the-static-curve-to-decide-the-growth-of-umbilical-cord-blood-banking-market.html "Getting Out Of The Static Curve To Decide The Growth Of Umbilical Cord Blood Banking Market") where to divert their efforts, as well as their funds? One suggestion here is that [customers can and should create their own limits _and_ set their own safe-guarding preferences](https://www.financedigest.com/loyalty-subscription-services-and-the-importance-of-customer-preferences-in-modern-banking.html "Loyalty, Subscription services and the importance of customer preferences in modern banking"). This makes it more complicated for banks, to be sure, but with the implementation of [machine learning](https://www.financedigest.com/make-time-to-reshape-the-finance-function-with-automation-and-machine-learning.html "Make time to reshape the finance function with automation and machine learning") software, it would be beneficial overall for everyone involved. Both flexible and protective, machine learning fraud prevention and detection can concentrate on those customers who are at higher [risk](https://www.financedigest.com/how-can-you-reduce-the-risk-of-fraud-in-b2b-payments.html "How can you reduce the risk of fraud in B2B payments?") for fraud while still maintaining preventative monitoring for those who are less so. Instead of the traditional fraud-detection model that exists in a 3-to-6-month cycle _behind_ malicious activity, a machine learning fraud- _prevention_ model can leverage safeguards [immediately and react instantly to protect its customers](https://www.financedigest.com/the-fca-is-taking-immediate-action-on-customer-vulnerability-but-how-does-this-impact-advisers.html "The FCA is taking immediate action on customer vulnerability; but how does this impact advisers?"), and this is all based on individually preferred limits and validators for customers. It would save money, too, removing the need for manual-heavy detection efforts which take up nearly 25% of the total cost of [fraud prevention](https://www.financedigest.com/payroll-fraud-and-how-to-prevent-it.html "Payroll fraud and how to prevent it") expenses. [Contactless payment](https://www.financedigest.com/the-future-of-contactless-payments.html "The future of contactless payments") is, on the whole, more beneficial than it is harmful, bringing efficiency, ease, and even protection against germs to the hectic lives of the consuming populace, but still threat actors persist. Using a tech-driven and customer-centric approach to improve back-end fraud detection as well as prevention, [banks can ensure a safe and streamlined payment](https://www.financedigest.com/5-ways-banks-can-compete-in-payments.html "5 ways banks can compete in payments") approach in the modern era of contactless everything. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---