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Financial Institutions Must Do More To Protect Consumers From Online Fraud

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With a mammoth £268M lost to cybercrime in the last 12 months, the time has come for banks to do more to tackle online payment fraud according to Nexmo’s Srivatsan Srinivasan

As new innovative technologies continue to change the way payments are processed, it is no surprise that the UK has been victim to over 1.3 million instances of payment fraud in the last year. Gone are the days when transactions were secured with a signature or verified by a PIN number. The rise of the internet has forced people to take the risk of paying online without any reliable means of verification whatsoever.

As m-payments become increasingly the norm, online marketplaces have become an alluring proposition for fraudsters. The recent TalkTalk and Vodafone cyber-attacks have only highlighted further the need for financial institutions and payment processing service providers to undertake a bigger role in protecting consumers.

Do banks see damage limitation as a cheaper alternative?

identity deception fraud social engineering security © Pretty much everyone knows that passwords aren't supposed to be shared. Passwords exist to protect your information and your employer's information from being seen by people who shouldn't see it and who could cause serious damage if they do access it. This is why you have a strong password on your banking information (you DO have a strong password on your bank account, don't you?) So how is it that Edward Snowden managed to get the passwords that gave him access to thousands of secret documents? According to a story from Reuters, Snowden did it in the easiest way possible. He asked for it. But of course there's more to it than that. What Snowden did was tell a couple dozen of his coworkers that he needed their passwords because he was a system administrator. Those coworkers, knowing that Snowden was fully cleared, figured it was safe, and gave him the passwords. Snowden used that trust to raid the NSA files of everything he could find. Remote Data Replication: Combat Disasters And Optimize Business Operations Watch It Now Leaving aside the propriety of what Snowden did, the fact that he was able to get the information he did with other people's login information speaks volumes. Perhaps more important, it speaks those volumes directly to you and your employer. Snowden exploited a weakness that exists at nearly every company or organization and which can be overcome only by having the right security policies and the right training. That weakness is trusting the wrong people at the wrong time. The obvious question is how this applies to you and your organization. After all, the chances are pretty good that you're not sitting on a pile of state secrets. But the chances are that your company has plenty of information that has value to your competitors, to criminals, or to people who want to use that information for other dubious purposes. Do you really want the outside world to see your customer list? Your financial statements? Your supply chain or manufacturing details? Probably not. Unfortunately, if you lose control of your organization's passwords, you're doing just that. But you can limit the problem by implementing some basic practices, making sure your staff is trained and then retrained frequently. Here are some things you can do: 1. Require passwords that are hard to guess, but don't go overboard. If you require passwords that are too complex, nobody will remember them. You know what happens next—yellow sticky notes on their monitors. That doesn't really help security. 2. Control what happens if a password is shared. It's easy to say that your staff should never under any circumstances share a password. But that's not how things work in the real world. Sometimes a system administrator really does have a reason to request a user's log-in credentials. 3. When that happens, what should the user do? That depends, but at the least they should know that they should then immediately change the password. You might also want to require that any password-sharing request be reported on a routine, easy-to-fill-out form that will disclose the action to whomever you designate to handle this, such as your IT manager. 4. Make password changes easy to accomplish, and automate the reporting process so that every such change is logged. 5. Don't depend on complex control software as a primary means of user verification. It might be useful, but nothing works as well as good practices properly followed. Remote Data Replication: Combat Disasters And Optimize Business Operations Watch It Now Require two-factor authentication for access to information that's really important. Many companies use a smartcard that doubles as an access card and organizational ID card. This reduces the problem of stolen log-in credentials. More complex methods of access control certainly exist and should be used under extraordinary situations, but are not always appropriate. It's important to remember that maintaining access security requires the willing cooperation of your staff. This means that you have to tell them what needs to be protected, the means they should follow to protect that information and what they should do if they suspect that protection has been compromised, even by someone who claims a plausible reason to do so. Here's one way such a procedure might work: One of your workers with access to something sensitive, such as human resource data, requests help with a problem logging in to the network. Somebody from the help desk asks for the log-in credentials to see what the problem is and to try to fix it. The person being helped provides the information and then immediately sends an email to a designated manager saying something like this: "I provided my log-in info to Sam Smith from the help desk to fix a log-in problem. My extension is 123." Once the log-in problem is solved, the employee should immediately change their password. That change will be recorded by your network management system where it can be verified by a manager or security staffer. Will that eliminate all data loss? Of course not, but it will eliminate some of it. It requires little in the way of resources and it allows management follow-up since problems—including an administrator who seems to be asking for a lot of passwords—will show up quickly. While you can throw automation at such a problem, at some point the most basic answer is training and management. It's hard to be more effective than that unless you already have training and management practices to enforce password discipline in place already. ShutterstockWith the rapid increase in mobile banking, fraudulent activity has inevitably increased. But before we consider the responsibility afforded to these financial institutions and payment processing services, it may first be prudent to establish awareness.

According to the Global IT Security Risks Survey 2015, the banks seem confused as to their responsibilities. The survey conducted by research specialist B2B International and Kaspersky Lab stipulates that only 67 percent of banks said that providing a secure connection was mandatory.

But how much does fraud prevention cost? Is it cheaper just to pick up the pieces once the damage is already done? The study confirms this suspicion, with 48 percent of financial institutions stating that the measures they take are designed to mitigate rather than solve the problem. In fact, 29 percent of the organisations claimed it was cheaper to deal with fraudulent activity once it had already occurred, rather than preventing it from happening in the first place.

Who else must take responsibility?

This then passes the responsibility on to other parties. As mobile payment providers such as Apple, Google and PayPal continue the battle to gain traction and market share in Europe, consumers are left more susceptible to fraud in the melee as payment technology advances outpace security advancements. Even the European Union has proposed to amend existing regulation to improve the security of payments and facilitate the emergence of innovative new mobile and internet payment methods.

Payment service providers, in particular, must also address this problem. They could be deemed liable for clients’ losses if they fail to act to prevent fraud or not implement a strong customer authentication process. However, strengthening the authentication process must not come at the expense of user experience, as this could potentially lead to shoppers abandoning their transactions. Does this then call for a risk-based authentication scheme which will allow the service provider to implement a One Time Password (OTP)? So, even if the banks have not implemented an OTP, the service provider is able to confirm that the user is who he/she says she is depending on risk indicators such as the size, location or the velocity of transactions.

Srivatsan Srinivasan is product leader at Nexmo

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