A Guide to Online Payment Security For Business Owners

Learn how your online business can secure transactions and payments for consumers to create a positive experience.
April 8, 2024
Gautham Gopakumaran
5 min read

Businesses across industries have embraced online payments to improve their payment infrastructures.

We have witnessed a sharp digital shift in payments, but what remains constant is theft.

Around 4 in 10 UAE customers reported experiencing fraud attempts, and it doesn't just end there.

Identity theft is another threat shadowing the UAE when it comes to online transactions.

But this does not stop consumers from using online payment modes to transact.

In fact, customers are now more informed than ever before. They proactively choose brands offering secure payment gateways and practices.

In this article, we share the must-have online payment security methods and practices that customers using Payby follow.

Recap: What is Online Payment Security?

Online payment security consists of the methods, practices, processes, or measures that business owners adapt to save all transactions from malicious activities, fraud, data breaches, and other similar unauthorized access.

This instills customer confidence and also makes businesses immune to financial losses or legal constraints.

What are common threats to online payment security?

As a business owner, it is your responsibility to keep your company’s and customer’s data safe. Here are the most commonly reported threats to payment security and how you can avoid them:

Phishing Attacks

This is one of the most common forms of cyberattack, where scammers pose as legitimate sources with emails, websites, and messages having a close resemblance. They appear to be very convincing, tricking unaware people into making dubious payments and transfers.

Here’s how you can avoid such attacks:

  • Train your employees to help them identify and fight against such attacks when encountered. Also, plan out customer awareness drives to educate your customers.
  • Deploy authentication protocols, email filtering solutions, and Multi-Factor authentication (MFA).
  • Choose the right security solutions that successfully create the firewall required to save your stakeholders from malicious activities.
  • And, keep their solutions and software security up to date. This includes client emails, browsers, and operating systems.

Data Breaches

Access granted to anyone outside of your organization is a data breach. Weak payment gateway security or hacking can lead to unauthorized access, followed by business loss.

The first step to fighting data breaches is complying with data privacy laws and careful access management of sensitive data.

  • You must then set up an incident management system with adequate response time for when a breach occurs.
  • Figure out a process for identifying and containing the breach immediately, as well as other protocols like informing the stakeholders and communicating.
  • Devise a thorough follow-up plan for examining and finding the root cause of the breach to prevent them in the future and rectify any weak touchpoints.

Malware and Ransomware

Malware is software designed to cause harm or gain unauthorized access to systems. It can be a computer, a server, or a mobile device. Ransomware, on the other hand, aims to encrypt or disrupt a system’s data, cutting off the administrator’s access. The fraudster then asks for a ransom to give access back or help decrypt the data.

These online payment security issues can cause real harm, and this is how you can prevent them:

  • Their common sources are emails, compromised websites, and downloads. Train your employees to steer clear of them.
  • Have security measures in place for any new app or software downloads, as well as links.
  • Implement security solutions that can detect any potential malware during the download and automatically remove it.

Identity Theft

Scammers can try to steal your identity by finding your business or personal details to create new ones or gain access to existing accounts and systems. They can steal your money or even impersonate you to steal your customer’s money. Here’s what can be done to avoid it:

  • Advise your employees not to use public wi-fi networks to access your company data.
  • Deploy strong passwords to secure access, and scan systems for suspicious emails, phone calls, or text messages.
  • Monitor your business transactions and reports to identify any suspicious activity.

But, you can never be too careful with the rise in types of threats. Multiple new threats keep hitting the news, so you must follow the common best practices and safeguard your business.

Best Online Payment Security Practices to Follow 

As a business owner, you must be aware of and ready with the best payment gateway security methods. This not only enhances your customer’s trust and confidence but also keeps your business up and running. Here are all the online payment security best practices you need to know apart from using solutions such as Payby to create transactional interfaces:

1. Data Encryption (TLS & SSL Protocols)

Data encryption is one of the best security practices businesses can adopt. This process encodes payment data to provide end-to-end protection. No one else but the person with the encryption key can read this encrypted data. TLS (Transport Layer Security) and SSL (Secure Sockets Layer) are the keys that can encrypt data. They ensure the security of data exchange on the internet.

One of the best examples of these keys is securing HTTPS. Websites with “https://” have an extra layer of SSL-certified protocol, as compared to “http://” which means insecure.

2. PCI-DSS Compliance

The PCI Security Standards Council sets the standards for recording and handling customers' data by a business. This global organization lays down ground rules, terms, and conditions through its Payment Card Industry Data Security Standards (PCI-DSS) policy. Businesses must be PCI-DSS compliant to avoid security breaches and legal implications.

3. 3D Secure

This system is put in place to double-check your customer’s identity while making a payment. Banks and financial institutions generally handle this layer to verify an identity via biometric scans or PIN codes.

4. Payment Gateway Security

Embed the right payment gateway to enjoy high security. The security of your chosen payment gateway dictates your security, so you must ensure that you choose the right provider. The success of payments also depends on the provider you choose because customers go through the payment when they see a provider they know and trust.

5. Payment Tokenization

This process replaces the original payment details, like card numbers, with a digital identifier called a ‘token’. These tokens help process payments without storing customer’s data, enhancing the security of a website. This ensures security even when a website is compromised.

6. Up to Date Operating Systems

Computer systems are frequently enhanced to improve security measures. To enjoy these security measures, you must keep all your operating systems updated. It is as simple as that.

7. Prevention and Monitoring Systems

These systems are customized based on a business’s personal needs and preferences. At PayBy, we have deployed an advanced fraud detection and prevention mechanism integrated into the payment gateway to keep you secure.

8. Robust verification process

You must also have a verification process for your customer’s data to ensure no unauthorized payments are made. This includes verifying a customer’s card details, address, contact details, and more.

9. Employee Training

Train your employees to make them aware of online payment security issues. They must be able to recognize a threat and know what action to take. Such understanding on all levels is very important. Create guidelines, training sessions, and more to emphasize it.

10. Customer awareness

Not just your employees but your customers should also be informed. Plan out communications campaigns around awareness of any ongoing or potential online threats. You can also use such campaigns to drive trust among your customers and help them understand that making payments with your business is safe and secure.

11. Two-Factor Authentication

This method uses two verification steps to identify and verify a user. This additional step can prevent a lot of mishaps and enhance security. A popular example of this process is OTP confirmation, where customers must enter an OTP sent to their registered mobile number besides typing in the PIN or password.


Online payment security is as critical as your business solution because one small mistake can lead to monetary loss and legal implications. Not just your business and its success, but its reputation is also linked to your online payment security.

A customer data breach leads to serious legal implications, fines, negative news coverage, and a loss of reputation.

But not with PayBy.

PayBy uses AI-based fraud monitoring, 3D secure authentication, and transaction risk analysis to ensure your security as well as approval rates. We follow the best online payment security methods and practices to keep your business and customers safe.

Want to boost the online security you offer on payments? Get started with PayBy today.

Ready to track and record transactions more efficiently?

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Related Articles

Chargeback Management: How Payment Gateways Can Help

Gautham Gopakumaran
5 min read
May 20, 2024
Payment Gateway, Chargeback

The digital shift is today’s reality, more vividly in the payment industry. Digital transactions are super convenient and have changed the face of payments. But it also has its share of challenges.

Some of the common challenges include safety and security issues, technical challenges, geographical limitations, payment processing downtime, and chargebacks.

While they all affect your business’s finances and cashflow, one of the most challenging ones to handle are disputes and chargebacks. If a business sells to global markets and manages records manually, they can potentially end up spending hours on the audit process and still lose the case.

In this blog, we give you a quick recap of what chargebacks are, common chargeback reason codes and how payment gateways like PayBy can help you prevent them.

What are chargebacks?

When a customer disagrees with a charge and disputes the transaction, it leads to what is called a chargeback. A successful chargeback reverses a payment and sends the amount back to the customer’s account.

But in addition to the reversal, the issuing bank or credit card issuer levies a fee on the merchant and the payment gateways.

This results in merchants experiencing revenue losses and paying additional fees, which affects their bottom line. A high chargeback rate can also lead to revoked payment processing privileges.


It is important to note that a chargeback is not similar to a refund. In a refund, the merchant voluntarily disburses funds for whatever reason. However, chargebacks are initiated by customers mostly via the issuing bank.

Here are the steps for how a chargeback is processed:

  • Dispute initiation - a customer connects with the issuing bank to dispute a transaction for a reason. The issuing bank, in partnership with the acquiring bank, lodges the dispute and processes it. Money is debited from the merchant’s account and credited back to the customer’s account. The payment gateway notifies the merchant of the transaction, following which the merchant can take action.
  • Merchant response - when notified, the merchant launches an investigation into the dispute. The merchant can choose to accept the chargeback or counter the dispute by submitting evidence to prove the request is invalid.
  • Issuer's decision - when the merchant counters the dispute to claim the request is invalid, a dispute resolution process is initiated. The issuing bank reviews all submitted documents to make a decision.
  • Potential outcomes - if the evidence is legit, the merchant wins the chargeback and the funds. Otherwise, the dispute and the chargeback are lost.

In this process, payment gateways play the role of notifying the merchants about the issuing bank initiating the chargeback. They also help with processing, managing and mitigating chargebacks in the future.

What are chargeback reason codes?

Issuing banks, while processing a chargeback transaction, issue an alphanumeric charge code. The purpose of the charge code is to inform the merchant of the reason behind the chargeback request. These reason codes are unique to card networks such as Visa, Mastercard, Botim, and more. Payment gateways may launch their own set of reason codes too.

These alphanumeric codes are carefully structured to educate the merchant about the underlying reason for the dispute. Some codes are alphabetic, like “DP”, illustrating the initials of the reason “Duplicate Processing”. While some are a combination of letters that explain the dispute group and numbers that point out the exact reason. For example - F14, where “F” is fraud and “14” is the reason.

Though the reason code system in chargeback management might differ, the categorization is more or less similar:

  • Processing errors
  • Authorization errors
  • Fraud
  • Customer disputes
  • Miscellaneous
  • Not classified

How payment gateways help manage chargebacks 

Chargebacks are not just merchant liability; they cost payment gateways a fee too. For company financials as well as better partnerships, payment gateways can help merchants with chargeback management.

Payment gateways assist merchants with better tools, features, accessibility, fraud detection, and management processes to resolve chargebacks. Some payment service providers go the extra mile to work with issuing banks for better merchant account status management. Here are some of the assistance from payment service providers:

Fraud prevention tools

Payment service providers maximize machine learning (ML) and artificial intelligence (AI) usage. These technologies have the power to detect and stop fraudulent activities. They can also pick up patterns of possible fraudulent activities and take the correct measures to cut them off.

Furthermore, the service providers deploy strict safety features such as multi-factor authentication (MFA) to authenticate users, card verification value (CVV) or card security code (CSC) to increase security, advance verification services (AVS) to compare and verify billing addresses, and more.

Dispute resolution features

Payment gateways provide guidance and support to resolve debit as well as credit card disputes. They offer an established process for dispute resolution that merchants can plug in and deploy. Besides being equipped with the process, they also provide real-time access to any data, documentation support, transaction records, communication channels, and evidence-gathering support.

They may also offer educational materials that walk merchants through best dispute resolution practices, strategies, compliance information, and more.


Some payment solutions can help merchants automate many mundane chargeback management steps. They help the company set up an automated chargeback alert to generate real-time triggers every time a customer requests a chargeback. Such prompt notifications leave enough time and room for merchants to chart a course of action in their favor.

Risk analysis

The chargeback resolution process is complex, time-consuming, and labor-intensive. It only makes sense to counter a chargeback and go through the entire resolution process when the odds are in your favor. Some payment providers can help you with just that.

They offer risk analysis based on all the data and documents. You can generate a detailed report of your winning or losing chances, or at least get a percentage win score. You can then analyze it to decide whether to fight a chargeback or accept it.

How can merchants prevent chargebacks with payment gateway assistance?

Spare yourself and your employees the hassle of chargeback resolution and strategize its prevention. Here’s what you can do:

  • Communicate clearly - practice clarity in communications. Communicate the terms and conditions of your product or service, features, pros and cons, agreements, policies, and more to your customers in an easy-to-understand manner. Eliminating misconceptions can reduce chargeback requests to a great extent.
  • Prioritize safety - choose the payment gateways that provide a high level of safety and security. You, your business, and your clients are in dire need of this. A couple of the safety measures you can follow are encrypting customer data for safe storage and following authentication practices like requesting multiple-factor authentication or CVV codes. AVS (Address Verification System) is another safety measure where billing addresses are cross-checked for verification.
  • Be thorough - have thorough steps in place to verify a transactor and the status of the transaction. Always confirm if the product was delivered, its delivery time, and receiver. As the merchant, you also need to have a thorough billing process. Display the charges and a breakdown in detail. Also, include any additional charges as and when they are levied.
  • Improve customer service - gaps in customer service often lead to chargebacks. You must provide your customer support team with everything they need to resolve customer queries proactively. You can also educate your customers to seek help from your helpline numbers before disputing a chargeback because it is faster.
  • Do follow-ups - you must monitor your chargeback rate and constantly try to improve it. You can always get started with your existing customers. Collect feedback from them to identify the shortcomings, if any, and ultimately correct your chargeback rate.
  • Keep records - maintain a database of your customers as well as chargebacks. In this way, you will have access to any documents you might need as proof, for research and analysis, and more.
  • Implement Security - you can use your payment gateway’s fraud detection tool to keep malicious activities in check. These tools not only detect and stop existing types of fraud attempts but also analyze data to find emerging patterns.

Lastly, be aware and informed at all times. Know your industry regulations, legal obligations, limitations, best practices, and more to make the best decision for your company. Build processes tailored to the unique needs of your company.

If you are on the lookout for a payment gateway that offers chargeback management assistance, PayBy can help you. We offer end-to-end chargeback management and also shield your business from false chargeback requests.

Get started today and manage chargebacks efficiently with PayBy.

Everything You Need to Know About Payment Gateway Reconciliation (2024)

Gautham Gopakumaran
5 min read
May 15, 2024
Payment Gateway, Payment Reconciliation

Payment gateway reconciliation keeps financial discrepancies away at the speed of transactions happening. However, it is often overlooked and the context is mistaken to be too heavy when clearly it is not.

In this blog, learn what it is, how it works and reasons why doing it manually is not a good idea for your business.

What is payment gateway reconciliation? 

Payment gateway reconciliation involves analyzing payment gateway information and bank balances for matching and identifying any discrepancies. It ensures there are no gaps between both books and if there are it immediately provides you with all the accurate information.

How does payment gateway reconciliation work? 

Here’s are the steps payment gateway reconciliation includes: 

  • Transaction Recording: When a customer makes a payment through your website or other channels, the transaction details are recorded in your payment gateway. This includes information about the transaction amount, date, payment method, and customer details.
  • Bank Deposits: Funds from these transactions get deposited into your merchant account or bank account after the defined settlement period.
  • Reconciliation: The transactions recorded in your payment gateway are compared with the corresponding deposits in your bank account.
  • Identifying Discrepancies: These could include missing transactions, duplicate transactions, or errors in transaction amounts.
  • Resolution: This typically involves contacting the payment processor or bank to investigate further, correcting any errors in the accounting records, or taking other necessary actions to ensure accurate financial reporting.

Why is payment gateway reconciliation important? 

Here are some reasons why payment gateway reconciliation is so important for your business.

1. Accuracy in financial reporting

With payment gateway reconciliation, both internal and external processes of financing are scrutinized. It helps to ensure that all the financial transactions are accurately recorded and processed. It also helps in compliance with all banking and accounting standards and regulations.

2. Fraud detection and prevention

Reconciliation involves matching the internal records with actual transactions to identify any discrepancies including unauthorized charges, and duplicate transactions. It also helps in preventing any fraudulent activities by keeping a constant check on financial transactions.

4. Improved decision-making

Accurate tracks of financial transactions with every important detail help businesses to remain informed and make strategic decisions about budgeting, forecasting, and resource allocation. This clear understanding allows you to be more confident about your financial decisions.

5. Compliance and auditing

Payment gateway reconciliation ensures compliance and facilitates auditing processes by accurately tracking financial transactions, maintaining transparency, and adhering to regulatory standards. This helps businesses avoid legal issues and financial penalties while ensuring trust and credibility with stakeholders.

6. Customer satisfaction

When transactions are processed accurately and efficiently, customers experience fewer issues such as overcharging, double billing, or payment failures. This reliability in payment processing builds trust and loyalty among customers, enhancing their overall experience with the business.

7. Cash flow management 

By reconciling payments with bank deposits, businesses can track their cash flow more effectively. This allows them to monitor incoming funds, identify any delays or discrepancies, and make informed decisions to manage operational and growth finances.

What are the common challenges of payment reconciliation? 

Some common challenges in manual payment gateway reconciliation process are:

1. Volume of transactions and manual errors 

A high number of transactions challenges the accuracy of the manual payment reconciliation process. It is also time-consuming and there is no guarantee of human errors while transaction matching. This can result in incorrect financial entries affecting financial reporting and decision-making negatively.

2. Complexity of transactions and processes

Financial accounting includes several complex transactions such as:

  • Partial payments
  • Refunds
  • Chargebacks, or 
  • Split payments

These can be challenging for manual payment reconciliation as keeping a record and matching these transactions require careful attention to detail.

Also, the reconciliation process in itself if done manually is pretty time-consuming, and the added complexity will only make it more difficult.

3. Timing differences

When a transaction is made and actually processed in a bank account is delayed or done in different timezones, it is a challenge. The manual recordkeeper has to go to an extent to identify the reason for discrepancies happening due to timing differences.

4. Bank reconciliation

The reconciliation process requires all complex banking factors beyond simple credit and debit transactions. It needs to cover factors such as outstanding checks, deposits in transit, bank fees, and interest charges. Ensuring that the bank balance matches the book balance requires thorough examination and adjustment of discrepancies.

5. Resource constraints

Taking care of such a detailed process of book and bank balance matching and ensuring compliance requires a great deal of effort and resources. If done manually, you need to devout the right time & budget and excel in experience.

6. Regulatory compliance

Businesses need to adhere to regulations such as the Payment Card Industry Data Security Standard (PCI DSS) and the General Data Protection Regulation (GDPR). Compliance with standards laid by these regulations is important in every situation otherwise leading to severe penalties and reputational damage. Manually, it is very difficult to keep track of all their standards for every financial operation as businesses need to

  • Stay updated with the latest regulatory changes
  • Conduct regular audits
  • Implement necessary security measures

7. Legacy Systems and fraud detection

Legacy systems lack interoperability or automation capabilities, making payment reconciliation processes inefficient and error-prone. Integrating data from disparate systems and maintaining compatibility with modern tools can be challenging for businesses.

In addition to the same, most legacy systems lack fraud detection capabilities. Their inability to identify suspicious patterns or anomalies in transaction data requires continuous monitoring and analysis, which can be overwhelming to handle.

Consequences of inaccurate reconciliation 

Here are the consequences you must know you can face with inaccurate reconciliation.

1. Financial loss

One of the direct consequences of an inaccurate reconciliation is financial loss. When doing reconciliation manually, you tend to make mistakes such as missing or duplicate transactions, incorrect amounts, or unauthorized charges. It can result in the gap between actual and reported revenue leading to financial discrepancies.

2. Cash flow problems

Inaccurate financial reporting will lead to false information of balance. This may result in cash shortages or delays impacting the business's ability to operate smoothly. It will completely impact your financial planning, leading you to make bad decisions.

3. Compliance issues

Accounting integration reconciliation takes care of compliance with industry standards, and inefficient reconciliation will lead to severe penalties and reputational damage.

4. Fraud and security risks

Inaccurate financial reconciliation can leave you and your business vulnerable to fraud and security breaches. Failure to identify any fraudulent activity in the bank and book balance can lead to great financial losses.

5. Operational disruptions 

Without accurate financial data, businesses can struggle to effectively manage their resources, plan for the future, and make informed business decisions. This could impact both the resources and the skills they need to keep the business running.

6. Reputation damage 

Customers quickly lose trust in the business if they experience billing errors or discrepancies, which can lead to negative reviews, complaints, and loss of business. This can damage the business's reputation among customers, suppliers, investors, and other stakeholders that play a part in their growth.

7. Audit failures

Auditors typically rely on accurate financial records to assess the business's financial health and compliance with regulations. Inaccurate reconciliation can raise red flags and even lead to penalties.

Recommended read: A Guide to Online Payment Security For Business Owners

Why should you use automated payment reconciliation methods? 

Understand why you should use an automated payment getaway reconciliation method with reasons including

1. Time efficiency and accuracy

Automated reconciliation processes and analysis of large amounts of transactional data in no time allow businesses to reduce time and effort. It also uses algorithms and advanced technology to ensure the accuracy of the results is uncompromised.

2. Real-time insights 

Automated reconciliation tools provide you with real-time insights about your transactions. These insights help businesses to:

  • Identify trends
  • Optimize cash flow management 
  • Financial analysis and forecasting 

3. Cost-efficient and scalable

Automation reduces the need for resources required for manual efforts. It allows you to analyze and match bank and book balances with accurate insights without the need for the team. Automated reconciliation systems can also adapt to changing business needs. It is scalable enough to accommodate fluctuations in financial reporting.

4. Easy compliance and fraud detection

With automation, there is no need to keep a close eye on all rules. It helps businesses to maintain compliance in the background. It ensures compliance with all updated industry standards and regulations.

Automated error reconciliation also prevents fraud as early as possible by identifying suspicious patterns in financial transactions. This enables you to get plenty of time to act upon it and save from further damage.

Recommended read: How AI is transforming fraud detection in payments

5. Improved Customer Experience

Automated reconciliation processes can also enhance the customer experience by reducing billing errors, discrepancies, and delays in processing payments.

Customers benefit from smoother transactions and more accurate billing, leading to increased satisfaction and loyalty.

Recommended read: How to improve payment processing user experience

Simplify payment gateway reconciliation with PayBy

Payment gateway reconciliation can be a very overwhelming process to handle when done manually. This is where using a payment solution like PayBy comes into play.

PayBy enables business growth by easing cashless payments for customers with powerful payment gateway reconciliation features.

Get started to know more.

The Future of Biometric Authentication in Payment Systems

Gautham Gopakumaran
5 min read
April 29, 2024
Payment security

Backtracking a few years, we could never imagine biometric authentication as a thing of today, as we are in it today. We can still evidently remember being in awe the first time our eye scans were used and the rest is history.

Fast forward to today; we do not just have PIN codes and patterns to access devices, we also use fingerprints, facial features, voice recognition, and so on. While there is still a lot to discover about biometric authentication, especially for the payments industry, the feature is all set to redefine security, convenience, accessibility, and the overall customer experience.

Let us walk you through what the future holds for biometric authentication in the payments industry and how business owners can benefit from it.

What is Biometric Authentication?

Biometric characteristics are unique physical or biological aspects of a person. These unique characteristics are recorded and used to identify people transacting via digital mediums.

Just like how people can access a device based on their unique physical characteristics, it is also used as a point-of-sale in the payments industry. Biometric authentication in payments refers to a security step used to verify a payment transaction. It detects and approves the physical characteristics of a user to authenticate or process deductions.

One of the most common mediums used in the payments industry is a fingerprint. Users can go cashless or even cardless, and make a payment using a fingerprint. There are multiple other mediums, such as the retina, signature, voice, face, and so on.

Biometric authentication in payments sits at the intersection of security and convenience. Hence, it is widely opted for and loved. This is why business owners such as you must be aware of its progress and future.

Applications of Biometric Authentication in Payments

Let’s walk through the types of biometric authentications used during a payment. Here are all the possible applications for payment solutions:

Fingerprint Scanning

Fingerprints are unique to individuals and easy to detect and use. Payment providers and users prefer this method over all the others because of its ease and security. So much so that five in six (87%) consumers use or plan to use this medium.

Hence, payment gateways and apps such as Google Pay have widely adopted it to authorize payments. Users can choose to either enter their PIN to gain access to the app or, alternatively, go for a fingerprint.

Facial Recognition

This technology uses the facial features of a person to authenticate a financial transaction. This feature is the second most popular option around the country. One great example is facial recognition-enabled shopping at Carrefour. Shoppers can make payments simply by smiling at the payment counter’s camera.

Alternatively, this technology can be used for online payments as well. Users can check out their purchase using facial recognition via their mobile phone’s camera. Security comes along with convenience because facial features are indeed another unique human trait.

Voice Recognition

Similar to facial recognition technology, voice recognition works on the vocals of an individual. This technology can identify vocal characteristics unique to individuals and facilitate a transaction.

Though not as common as fingerprint and facial recognition, voice-enabled payments are on the rise. Users can read out a command or passphrase to authenticate payments in mobile wallets, banking apps, smart speakers, and more.

Iris Recognition

This technology scans a person’s eye to read unique patterns in the iris, i.e., the colored part of the eye. This technology also uses cameras at checkout counters or mobile devices to scan an eye and authenticate payments.

They are a perfect fit for payment services used in high-security areas like airports, government services, health care services, and more. Because this technology helps fight identity theft, it is deployed in places with security concerns.

Behavioral Biometrics

Another mode of biometric authentication is behavioral patterns. Not everyone has the same movements, the same rhythm of doing things, or the same use cases and interactions with digital mediums.

Payment gateways can detect such behaviors as typing speed, mouse usage, or how the user has interacted with the mobile’s display to identify the right personnel. This technology has the potential to be a widespread medium that works without extra user input. Say hello to the most frictionless payment experience.

Palm Vein Authentication

This technology captures the unique vein patterns on a user’s palm for authentication. This technology is used in places where physical contact is dangerous, such as healthcare facilities.

Plus, the palm vein is considered a better alternative to a fingerprint. Fingerprints are affected by age, disease, skin state, and more, but not palm veins, which remain the same from childhood.

Heartbeat Authentication

This technology is not deployed or put to use currently since it is still in the trial phase. This technology is built to identify and verify the unique patterns of a person’s heartbeat. The progress is gigantic and has the potential to be yet another safe, secure, and contactless biometric authentication mode.

Multi-Modal Biometrics

Not just biometric technology, but AI technology for dubious transactions is also evolving. Hence, multiple biometric modes can be used to enhance security and 2x authentication accuracy.

Activating multiple modes, say fingerprint and facial recognition or iris and voice recognition together would guarantee high security levels. Results? happy customers and accurate payment processing.

Tokenization with Biometric

Storing biometric data has another limitation: theft. Just like sensitive card information can be replaced with a digital identifier called a token for storage, biometric data can be replaced with a cryptographic token.

They are generally an alternative to a user’s identity and can be stored and used for authentication purposes. This leads to better privacy and security for the user’s data.

Advantages of Biometrics in Payments

But, with all the existing authentication mediums, why should you choose biometrics in payments? Here are some of the benefits of biometrics in payments:

  • Enhanced Security - biometric features are hard to replicate because they are unique to every user. Passwords can be the same, PINs can be the same, but not biometric features.
  • Reduced Fraud - biometric authentication is an extra layer of security. The one that scammers cannot pass through. Scammers cannot act like other users or steal their unique biological traits.
  • Convenience - carrying cash or cards is not really a thing with biometric authentication. Users can initiate and complete payments without even monitoring passwords. They can just use any biometric mode and make a purchase, maximizing convenience and experience.
  • Frictionless Transactions - biometric authentication is seamless and easy as opposed to entering passwords during checkout, hence reducing friction. Multiple taps and steps are replaced with just one activity, such as displaying a palm/fingerprint, eye, or face. Super easy, isn’t it?
  • Reduction in Identity Theft - Scammers can steal card identities, but not the unique biological features of humans. It is very difficult for fraudsters to pass, say, a user's fingerprint or facial recognition.
  • Improved User Experience - with reduced friction, users can enjoy an improved and seamless payment experience. The combination of convenience, ease, and security that biometric authentication offers enhances user experience.
  • Lower Operational Costs - an initial investment is required for this technology, but it reduces operational costs in the long run. There are no other costs associated with this technology.
  • Compliance with Regulations - this technology is compliant with country regulations. If you guarantee data privacy for your users, you may use their biometric data to facilitate payments.
  • Future-Proofing - the benefits we see are just the beginning of this technology. It is evolving with a high adoption rate across the payments industry. This is a plan for the long run.

Challenges of Biometrics in Payments

Nothing exists without cons, and here are the challenges facing biometric usage in payments.

  • Privacy Concerns - biometric data is private, and there can be user concerns or resistance to companies storing their biological or physical details.
  • Security Risks - there are some security risks associated. Spoofing is the process of fooling authentication technology with fake artefacts.
  • Accuracy and Reliability - storage of biometric quality has a direct impact on accuracy. When not done right, it can also reject a genuine user, creating friction.
  • Interoperability - information exchange between different systems is a grave threat to privacy.
  • User Acceptance and Adoption - not everyone is comfortable with using their biometric identity to make payments.
  • Regulatory Compliance - biometrics is a user’s private data at the end of the day. It has to be handled with care, or there can be legal implications.
  • Cost and Complexity - the technology is not widespread and comes with extra requirements like cameras and detectors; hence, gets pricey. Plus, it is often pretty complex to integrate and deploy.
  • Single Point of Failure - if the authentication fails, the entire transaction will fail as well, creating user friction. Additionally, when compromised, there is no alternative access for users.
  • Ethical and Societal Implications - biometrics are physical traits and hence might have ethical and societal implications.

Biometric authentication will change the face of payments. It is all set to offer increased security, efficiency, and convenience. But there’s more to this technology than we have already experienced. It is in the evolution phase right now as companies assess its pros and cons.

The future of biometric authentication in payments, however, is bright.

How AI is Transforming Fraud Detection in Payments

Gautham Gopakumaran
5 min read
April 22, 2024
Payment security, Artificial Intelligence

Cashless is the new currency of the country and a fully cashless society is soon to be a reality.

Predictions are that the UAE will become fully cashless by 2030.

While digital payments are clearly convenient, there are some cons consumers and businesses both need to be wary about - especially, frauds and scams.

Over 50% increase in fraud reports for the year just proves the intensity. It gives us all the reasons why it is important to implement robust fraud detection in payment. And that’s where you can call AI or Artificial Intelligence to the rescue.

The machine learning algorithms, predictive analytics, natural language processing, and other capabilities that AI brings do not just solve the efficiency, accuracy, and user experience challenges, but also help identify malicious activities.

This article will walk you through the transformation of AI in fraud detection.

Challenges of Fraud Detection

Advancement is everywhere. While your payment systems have evolved, so have the fraud techniques become sophisticated.

Here’s the thing with the traditional fraud detection systems, they are built to work on fixed patterns and rules. They are rigid with the capability to identify just the existing trends. This is why your current detection system might fail to determine the onset of new fraud trends.

Secondly, such a system reports anything that goes beyond the fixed rules. Result? False alarms. It also blocks genuine customers out and reports them leading to business loss. This is why your business needs a system that can adapt to evolving business needs and AI in fraud detection comes into play.

How is AI Used for Fraud Detection

Artificial Intelligence uses a set of machine learning algorithms with the capability to analyze and identify abnormal behaviors or patterns. The first step in the process is - learning the normal behaviors and what’s considered standard user behaviors while making payments. For the next steps, this technology scans through all the data to find any behaviors that are off the track. It doesn’t end here, where the traditional fraud detection systems do, i.e. detect and report anything abnormal.

AI now takes a step ahead of the curve to analyze this new pattern or new behavior to understand the intention behind it. It has the capacity to alter its parameters to make sense of the new detection and understand if it is genuine or suspicious.

Based on the hypothesis, it takes immediate action by either blocking the transactions or giving access to them.

Here are some of the common AI mechanisms:

  • Data collection
  • Model training
  • Alerting and reporting
  • Feature engineering and detection
  • Self-learning

Benefits of AI for Fraud Detection

Now’s the right time to be a step ahead and safeguard your business from online threats. Learn about the benefits of machine learning and AI for fraud detection:

Enhanced Accuracy

AI algorithms are taught to pick recurring fraud instances or patterns that might miss the human eye. This meticulous scanning and detection function contributes to enhanced detection and accuracy. AI can scan through heaps of data and pick up malicious activities in no time.

Real-time Results

AI algorithms work on a real-time basis. They have the power to block suspicious activity as and when it occurs, cutting off any negative implications immediately. This keeps businesses safe from threats in all capacities.

Reduced Manual Workload

Employees would no longer spend time on manual fraud detection, monitoring, or analytics. This gives them a lot of time to focus on innovative and strategic activities to grow your business. Save your employees some time and give your business some innovative wings.

Self-learning Capacity

The technology is built to think like humans. This means it is on the quest to improve its knowledge, and the more data it gathers, the more it learns. The technology keeps growing, making better analyses and predictions. Plus, the AI systems of the world also exchange knowledge among themselves. Hence, better predictions are always evident.

Easy to Scale

No data is too much data for AI models. They have the capacity to go through tons of data, and they can do it in seconds if not milliseconds. This is extremely helpful when businesses grow. They can enjoy high accuracy and speed without having to upgrade their AI-deployed fraud detection system.

Highly Cost Effective

While there are some initial investments connected with deploying AI in fraud detection, they are cost-effective in the long run. They automate a lot of fraud detection and rectification processes and also eliminate mundane manual tasks. Not to forget, they stop fraud which can otherwise lead to heavy monetary losses. Plus, there are no additional costs during scaling.

Customer Satisfaction

Security is given with AI in fraud detection which increases customer trust and retention. Additionally, traditional limitations such as false positives are put at bay. This increases customer satisfaction and business revenue. With these benefits, business owners can enjoy a competitive advantage and massive business gains.

Common Frauds That AI Can Detect

There is no stopping new fraud scams from emerging. But, here are some of the common AI frauds you are highly likely to encounter:

Card Fraud

Scammers do not sit down to find cards with loopholes or weak security. They leverage bots to find these gaps and detect them at large to conduct a brute-force attack on payment gateways. They are extremely common and because they are done using bots, AI has the power to detect them.

AI goes beyond just reading IPs and the IP reputation of a source and into the behavior to detect what’s a bot and a real person. Based on the analysis, AI takes immediate action to block any malicious bots. CAPTCHA is another form of AI technique used to distinguish people from bots.

Fake Account Creation

The biggest prey to fake account creation is social media. There are just so many accounts creating havoc at large, and it is a bot art. They can create tons of accounts at a go to skew your, say, product reviews, spread misleading information, create malware, and more.

Heightened sign-up security is the solution you say, incorrect! Increasing the standard sign-up security process would only increase user friction, leading to an increased user drop-off rate. AI however can detect and catch bots and fraudsters from the existing signup flow.

Account Takeover (ATO)

Fraudsters cannot just create fake accounts, they can also take over your existing business accounts. This can put a strain on your business reputation and financial health.

You sure can deploy a multi-factor authentication but its effectiveness relies on users too. It doesn’t work for the ones who don’t toggle it. AI, on the other hand, has what it takes to detect the tiny clues that scream of attempted ATO, and immediately block it.

Credential Stuffing

Another method of attempted scams is credential stuffing. Well, scamsters use bots to find and fill in common usernames and passwords to crack access. They even leverage previously stolen data to detect reused passwords of users to gain access and steal.

AI is always on the lookout for accounts with multiple login failures or other such abnormal behaviors. It can find, report, and block such attempted credential stuffing breaches.

Where is AI Headed 

AI and machine learning for fraud will continue to evolve forever. This makes us confident that it can preserve your business’s security. These systems are trained to think like humans and analyze all data points like customer behaviors, device functionality, and more besides the mainstream financial data.

The result? Detection accuracy and it will just get better.

Regarding what the future holds, AI models can be trained to adapt to any possible future onsets. They will continue to be the driving security force for your business and your customers, acting as the shield of protection. We cannot emphasize their ability to self-learn and act on a real-time basis enough, which is an asset for business owners such as you. You must leverage AI in fraud detection for your payment infrastructure and reap security benefits.

Ending on this note, if you use AI for bank fraud prevention, you cannot just protect your customers from fraud but also enhance their experience transacting with you. Yes, it provides smarter detection, hypothesis, and resolution in real time. But it can also analyze customer behavior and data points that can help you make critical product enhancements and innovations.

It’s time to provide your customers with a frictionless and safe payment experience without the workload. And PayBy is here for you.

We leverage AI-based fraud monitoring, 3D secure authentication, and transaction risk analysis to provide the utmost safety. Get started with Payby to know more.