Physical cards may be in one’s comfort zone, but virtual cards have proven to be safer and more convenient. Learn more about virtual cards.
How Virtual Cards Protect You Against Fraud
More and more businesses are digitally transforming their finance processes with Virtual Cards. Let's explore how virtual cards help reduce fraud.
According to World Bank data, the global percentage of adults with bank accounts, using other financial institutions, or depending on mobile money providers has increased significantly, rising from 68% in 2017 and 51% in 2011 to reach 76% at present. Remarkably, this surge in account ownership is observable across a wide array of countries. A significant catalyst behind the swift growth of the virtual card market is the increasing adoption of digital and online payment methods.
What are the common risks in online transactions?
One cannot deny that online transactions and use of technology, comes with its own risks. Let’s look at some common risks with online transactions, before we talk about ways and solutions to overcome these.
1. Man-in-the-Middle (MITM) Attacks
In a Man-in-the-Middle attack, cybercriminals intercept and potentially alter the communication between two parties who believe they are communicating directly with each other. During online transactions, sensitive information exchanged between users and a website or financial institution is intercepted by the attacker without the knowledge of either party.
The cybercriminal positions themselves between the user's device and the service provider's server. This way, they can ‘eavesdrop’ on the data being sent or even modify it for malicious purposes, all while passing it along to the intended recipient to avoid suspicion.
2. Synthetic Identity Fraud
Synthetic identity fraud involves creating fictitious identities by combining real and fabricated information. Cybercriminals use these synthetic identities to apply for credit, open bank accounts, or conduct transactions. Traditional identity verification methods struggle to detect this type of fraud because the identities are not linked to real individuals.
Attackers blend legitimate data, like actual Social Security Numbers, with fake details, such as fictitious names, addresses, and birth dates. Over time, these synthetic identities can build credit histories and appear as genuine financial profiles, making it challenging to identify fraudulent activities.
3. Business Email Compromise (BEC)
This is a targeted attack where cybercriminals gain unauthorised access to a company's email system through social engineering or phishing tactics. Once inside, they impersonate employees or executives to deceive others within the organisation or external partners.
By crafting convincing emails that appear legitimate, the attackers manipulate employees into performing unauthorised financial transactions or sharing sensitive information. These emails often create a sense of urgency or exploit relationships between colleagues, suppliers, or clients to make their requests seem authentic.
By recognising the techniques used by cybercriminals, individuals and organisations can be more vigilant in protecting sensitive information and financial assets.
How are virtual cards better at fraud protection?
Virtual cards offer better fraud protection compared to traditional credit or debit cards due to their advanced security features. Each of these elements contributes to making virtual cards a robust defence against various types of online fraud.
1. Dynamic Card Details
Virtual cards generate unique and temporary card details for each transaction. Unlike traditional cards with static card numbers, CVVs, and expiration dates, virtual cards' dynamic information changes with every use. This means that even if cybercriminals intercept transaction data during a Man-in-the-Middle attack, the compromised details become useless for subsequent transactions. This feature significantly reduces the risk of fraudsters using stolen information to make unauthorised purchases.
2. Real-time Transaction Notifications and Alerts
Virtual card providers offer real-time transaction notifications and alerts through mobile apps or email. Users receive immediate updates whenever their virtual card is used. If a transaction appears suspicious or occurs in an unexpected location, the user can quickly identify potential fraudulent activity. This enables users to take prompt action, such as freezing the card or reporting the suspicious transaction to the provider, mitigating the impact of fraudulent transactions.
3. Separation of Personal and Financial Information
Virtual cards are typically not linked to a user's primary bank account or credit card. Instead, users can fund their virtual cards with a specific amount of money, keeping their primary financial information hidden from potential attackers. Even if a virtual card is compromised, it limits the potential damage, as cybercriminals cannot access the user's main financial accounts or personal data.
4. Prevention of Unauthorised Charges and Identity Theft
Since virtual cards are not physically present and are only used for online transactions, they offer an added layer of protection against identity theft. In physical card transactions, a fraudster may clone the card or steal the card details during a point-of-sale transaction. Virtual cards eliminate this risk as they are not tied to a physical card. Moreover, the dynamic card details make it extremely challenging for cybercriminals to use stolen information for any fraudulent activities.
Preventing Virtual Card Fraud
While virtual cards offer robust fraud protection, it is essential for users to remain proactive in safeguarding their financial security. Employing a combination of risk-based authentication, transaction velocity monitoring, and cardholder verification methods can significantly enhance the protection of virtual cards against potential fraud.
1. Easy Configuration
Virtual cards stand out as a secure and user-friendly solution, offering individuals the ease of configuration and enhanced control over their transactions. Users can easily generate virtual cards with unique details, such as spending limits, validity periods, or designated merchants. The simplified configuration process also allows for quick adjustments or cancellations, providing users with added peace of mind and a heightened sense of security in their online transactions.
2. Seamless Management
Virtual cards offer users convenience, empowering them with seamless management and full control over card issuance and editing. The user-friendly interface allows for personalized details like spending limits, validity periods, or designated merchants. With such seamless management at their fingertips, users can confidently make online transactions, knowing they have complete control over their virtual cards and enjoy a hassle-free, secure experience.
3. Cardholder Verification Methods
Cardholder verification methods add an extra layer of security to virtual card usage. These methods may include two-factor authentication, where users must provide an additional form of verification, such as a one-time password sent to their mobile device, to complete a transaction. Other verification methods may include biometrics authentication, requiring users to provide their fingerprint or facial recognition to authorise transactions. Utilising cardholder verification methods strengthens the authentication process and ensures that only authorised users can use virtual cards.
With the increasing prevalence of online transactions and potential fraud risks, selecting the right virtual card becomes crucial in safeguarding financial security. One such option worth considering is Prospend's virtual card, known for its advanced security features and user-centric approach.
Prospend offers dynamic card details, ensuring each transaction is unique and secure. Real-time transaction notifications and alerts keep users informed of any suspicious activity, allowing swift action to prevent unauthorized charges. Additionally, Prospend implements risk-based authentication and advanced cardholder verification methods, providing an extra layer of protection. By choosing Prospend's virtual card tailored to their specific needs, users can enjoy enhanced fraud protection and greater peace of mind in their digital transactions.
By choosing Prospend's virtual card tailored to their specific needs, users can enjoy enhanced fraud protection and greater peace of mind in their digital transactions. Book a demo today.