In this article we will learn what is P2P fraud?
How to avoid them? And what to do if you get scammed?
Person-to-person (P2P) fraud impacts millions of Americans each year. Data from the Federal Trade Commission’s (FTC) annual Sentinel Report highlights that total losses, through P2P and other payment channels, will exceed $2.7 billion in lost money by 2023. With the upcoming shift in responsibility for these types of financial losses from consumers to banks and fintech companies, both financial institutions and consumers need to be vigilant in identifying and preventing potentially fraudulent P2P transactions.
What is person-to-person (P2P) fraud?
P2P fraud is a consumer scam in which a bad actor uses social engineering to trick consumers into sending money through a P2P channel for illicit gain. Common financial channels include Bank Accounts, PayPal, CashApp, etc. Since consumers authorize payments in P2P scams, known as Authorized Push Payments, the former consumer is responsible for the financial losses of the P2P scam.
However, there is a major shift in liability for losses caused by consumer fraud. The Consumer Financial Protection Bureau (CFPB), along with several U.S. Senators, have pushed for banks and fintech companies to take responsibility for these losses with the escrow account holding the responsibility.
How to Avoid P2P Fraud
Understanding how P2P fraud works and the best practices for prevention can help both consumers and banks prevent future fraud. CFPB Director Rohit Chopra calls the level of P2P fraud in the United States frightening, with both regulation and education about P2P fraud more important than ever. Here are some best practices consumers and banks can follow to help identify and prevent harmful P2P fraud.
Best practices for consumers:
Only send money to people you know and trust
Process P2P payments like cash, no payment until you receive the product
Use bank fraud alerts
Optimize your security settings
Take your time and don't succumb to pressure.
Never send payments to yourself
Protect your personal information
Protect your password
Do not use public wifi
Best practices for banks and fintech companies:
Use advanced identity fraud detection and prevention software from the start
Push the identity signals obtained at inception into your account management model, especially for identities with riskier margins
Perform a portfolio audit of your current account base to identify and eliminate synthetic identities that act as money mules
Enable real-time fraud alerts for consumers
Provide advanced security measures
What should you do if you are a victim of P2P fraud?
If you are a victim of P2P fraud, you should:
Notice for P2P payment platform
Contact your bank.
Seek support from Binance.
What are the common forms of P2P scams?
Unfortunately, P2P scams are common, with 12% of U.S. banking customers affected by P2P scams and 11% affected by family members. Impersonation scams are the most common type of P2P scam. In the United States, 1 in 5 people have been affected by impersonation scams, with the average loss being $1,000. Overall, impersonation scams account for $2.7 billion in annual losses, including P2P payment programs, as well as payments via ACH, wire transfers, gift cards, and even ATMs.
Authorized push payment (APP) fraud is a common type of impersonation fraud. In APP fraud, victims are manipulated into authorizing real-time payments to fraudsters through social engineering attacks such as impersonation. Given the speed and ease of use of these peer-to-peer networks, fraudsters are increasingly using P2P channels for APP fraud.
Fraudsters engaging in P2P impersonation fraud use synthetic identities to create fake accounts at the receiving financial institution. For this reason, the shift in responsibility we are seeing in the United States will place more emphasis on receiving banks to prevent fraudulent identities from entering through the front door.
In addition to advances in self-regulation from banks and fintechs, identity fraud detection and prevention software can help put an end to P2P fraud. So far, Zelle is the first P2P provider to lead a self-regulatory effort and map out rules for accepting banks to be responsible for certain types of P2P fraud.
How Socure helps prevent P2P fraud
Socure is the leading SaaS identity fraud detection and prevention platform, leveraging proprietary machine learning models that contain the largest identity graph and performance feedback dataset in the industry. While an attack may be new to your bank or fintech, Socure has likely seen and learned from the attack elsewhere in our network.
Socure offers several features to protect against P2P fraud. Our comprehensive RiskScores and Correlation Values can assess the risk of P2P credentials in real time, helping to identify and stop fraudulent activity as it happens.
Socure’s Portfolio Scrub accurately detects hidden identity risks in accounts and provides actionable strategies for action. And Sigma Synthetic Fraud identifies fake identities, helping banks and fintechs close the door on new synthetic fraud attacks.
With Socure's versatile identity fraud detection and prevention software, banks can prevent fraud quickly and effectively, while ensuring a positive customer experience.
To learn how these solutions can help your organization, schedule an appointment with our dedicated team here.
