Internet banking, which is also known as e-banking, online banking or virtual banking, is an electronic payment system that enables customers of any financial institution to carry out a range of monetary transactions through the financial establishment’s website. While Internet banking is widely used for its convenience, internet banking frauds have become a serious threat to consumers. This misuse of technology is creating issues for online banking systems. In this article, we will learn more about online bank fraud, the types of bank fraud, and more. 

Did you know that online banking is much more cost-effective, easily accessible and data-driven than traditional banking making it a popular choice for both financial institutions and consumers? 

What is Online Banking? 

The Internet has facilitated all banks and customers to access their bank accounts and perform financial tasks online. Internet banking is a method of banking in which transactions can be conducted electronically with the help of the internet. Customers can operate their bank accounts, transfer funds, carry out balance enquiries or make standing instructions to their banks instantly with the help of net banking. This is done by accessing the net banking facility of the net banking portal of their specific bank. 

An account holder or consumer needs to fill in a few details to register into the banking portal and carry out necessary transactions without being assisted by the bank. This account can be accessed with a password and username and sometimes an OTP or additional code is required before the fund transaction is conducted. 

Also Read: Limitation in ATM Cash Withdrawal Across Top Banks in India

What is Online Banking Fraud?

Online banking fraud happens when a criminal illegally gains access to and transfers funds from a user's online bank account. In some cases, the individual is duped by the criminal into making that fraudulent money transfer themselves. Internet banking fraud is a kind of identity theft and is usually done with the help of phishing techniques.

Internet banking is now widely used to verify account details, pay bills, make purchases, print statements etc. Even though the user's identity is verified through this process, consumers often fall into the traps of cyber fraudsters leading to online fraud in banking.

What are the Types of Frauds in Banking? 

Banking fraud need not necessarily be specific. However, there are many different types of fraud that usually occur in the banking sector. These are as follows:

Phishing 

Phishing emails can target online banking customers as well as online auction sites and other online payment platforms. Generally, a phishing email asks a banking consumer to follow a provided link so that they can update their bank account details. When this link is followed, the consumer unknowingly downloads a program that can capture his or her personal banking login details and account information. This program then sends them to a fraudulent third party. 

Spam 

Another e-fraud in banking involves spamming or sending electronic unwanted messages or junk mail to a user’s email account or mobile phone. These emails try to convince the user to buy a service or product or visit their website to make purchases. They also try to trick the user into divulging sensitive bank account information or credit card numbers. These messages may vary, but they are essentially commercial and can be sent in an annoyingly frequent manner.

Vishing 

Vishing happens when a criminal calls a potential victim and masquerades as someone from a legitimate organisation like an internet provider or a telephone company. The criminals then ask for financial and personal information and use those for their fraudulent purposes or convince the customer to transfer money to the fraudulent account. 

Malware

Malware is malicious software like a Trojan or a virus that is hidden in free downloads and attachments. It interrupts your online banking activities and pops up a fake screen that appears genuine. It then prompts you to provide codes and passwords that are saved and used to access your online financial accounts to make fraudulent payments.

ID Theft 

This fraud in banking is a common process of stealing victims’ identities to perform the following tasks:

• Application Fraud: The fraudsters use the personal details of the victim obtained from discarded or stolen documents such as utility bills or bank statements to open an account in their name.

• Take Over the Victim’s Account or Account Takeover: The fraudsters use phishing or other kinds of social engineering to gain the victim’s details and then deceive the victim’s bank and make them believe that the victim’s address has been changed. This process allows the fraudster to control the victim’s account. The fraudsters socially engineer the person's details through Vishing, Smishing, or Phishing in order to access their online accounts without having to contact their banks.

Nigerian Scam 

Fraud 409 or 419 or Nigerian Fraud is a lottery scam where overseas people fraud on innocent people or organisations by promising money in exchange for a nominal fee. This fee is stolen and the lottery never occurs.

Spyware 

Spyware like Trojan Horse is software that is secretly installed on computers to collect sensitive information from the computer without the knowledge or permission of the user. Spyware generally takes business information, personal information, processing capacity and bandwidth and transfers it to a third party. Trojan Horse spyware unfolds when malware or malicious software is embedded into a potential victim’s computer without his/her knowledge. Trojans come in the form of attachments or links from unknown email addresses. After installing, the software auto-detects the person’s online banking records, password and username which is then transferred to the offender. People who use computers in public internet cafes are most susceptible to spyware or malware. 

Also Read: What Are Neo-banks? How Do They Differ From Traditional Banking?

How can Fraud Banking be Prevented? 

Avoid accessing online banking systems from unsecured wifi systems and operate only from home computers. Never reply to online queries related to the personal details of your bank. You should never save your password on your emails or public computers. Moreover, you can also follow some basic steps mentioned below to secure your account. Here are some basic ideas to prevent cyber criminals from trapping you in e-banking fraud.

Always Check ‘Last Logged In’ 

If your bank has the ‘last logged in' panel, check it from time to time to notice irregularities. If you notice suspicious activities, contact your bank and change your password. 

Keep your System Updated 

Check security updates for your computer regularly since these will reduce risks. Ensure that your browser and computer operating system have the latest security patches installed from trusted websites. 

Don’t Allow Public Access 

Never leave your computer unattended after inputting sensitive information while an online transaction is ongoing. Avoid using shared or public computers, cybercafés, and other locations that offer wireless network services. 

Follow Bank Instructions 

Since banks put themselves through continuous upgradation by their IT departments to mitigate risks, it is always necessary to follow their guidelines. These instructions include encouraging customers to use virtual keyboards so that the characters typed cannot be identified by hackers. Banks also send SMS alerts after each transaction to inform them of any unknown activity. 

Protection 

Learn to detect Trojans that appear as viruses, malware or spyware through anti-Spyware, Antivirus Software and Adware. Learn to keep your passwords, documents, and cards safe and monitor your bank accounts to prevent identity theft.

Also Read: A Guide on Issuing Bank | How Does It Work And Benefits

Conclusion

The criminals obtain a person’s details while masquerading as bankers, who replicate the banking site the person uses. They are then asked to provide all-important personal details and bank account details on the pretext of upgrading the database. Then the password and number are used to carry out monetary transactions with the victim's bank without them knowing. It involves spamming so that fraudsters can gain access to the online banking details of any individual. It is better if you follow the guidelines provided here and given by your bank to secure your account.

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