Account takeover fraud has become a growing threat that affects millions of individuals and businesses worldwide. This type of fraud occurs when a malicious actor gains unauthorized access to someone’s online account and uses it for fraudulent purposes. The impact can be devastating, leading to financial losses, identity theft, and a significant breach of trust for both consumers and businesses.
Here’s what you need to know.
Understanding Account Takeover Fraud
Account takeover fraud is a form of identity theft where a fraudster gains unauthorized access to someone else’s account—such as a bank account, email, or e-commerce profile—and uses it for their own benefit. Once they have control, they can change login details, make unauthorized transactions, or use the account to commit further fraud. This type of fraud can be highly disruptive and damaging for the individuals whose accounts are compromised and the businesses that have to deal with the fallout.
Fraudsters use a variety of methods to gain access to accounts. Some of the most common methods include:
- Phishing. This is one of the most prevalent tactics, where fraudsters send emails, text messages, or even make phone calls pretending to be a trusted entity like a bank or a well-known company. The aim is to trick individuals into providing their login credentials or other sensitive information. Phishing attacks are becoming even more sophisticated with generative AI.
- Credential Stuffing. Here, fraudsters use stolen username and password combinations from previous data breaches to attempt to gain access to accounts on different websites, banking on the fact that many people reuse passwords across multiple sites.
- Malware. Some fraudsters use malware to infect a victim’s device. This malware can capture keystrokes, take screenshots, or directly steal login credentials when users access their accounts.
- Social Engineering. This involves manipulating individuals into divulging confidential information. It could be impersonating a trusted contact or creating a sense of urgency that causes the victim to reveal their account details.
- SIM Swapping. In this method, fraudsters manipulate phone service providers to transfer a victim’s phone number to a new SIM card. This allows them to intercept two-factor authentication (2FA) codes sent via SMS and gain access to accounts.
Account takeover fraud can happen on various platforms, but some are more frequently targeted due to the value of the data or the potential financial gain. Common targets include:
- E-commerce sites. Fraudsters often target online retail accounts to make unauthorized purchases, especially those with saved payment methods.
- Financial services. Bank accounts and online payment services are prime targets, as they offer direct access to funds.
- Social media platforms. These accounts can be used to impersonate the victim, scam friends and family, or further propagate phishing schemes.
- Email accounts. Once a fraudster has access to an email account, they can often use it to reset passwords for other linked accounts, gaining broader access.
The Consequences of Account Takeover Fraud
Account takeover fraud has severe consequences for both consumers and businesses. For consumers, the risks include financial loss, as fraudsters can drain bank accounts or make unauthorized purchases, and identity theft, leading to further financial damage and misuse of personal information. Victims may also experience damage to their credit scores if fraudsters apply for credit or fail to pay for purchases made under the stolen identity.
For businesses, the consequences of account takeover fraud are equally significant. Financial losses can arise from fraudulent transactions, including chargebacks, refunds, and lost merchandise. Businesses also risk reputational damage if customers perceive that their security measures are inadequate, which can result in a loss of trust and loyalty. Ultimately, the loss of customer trust can lead to decreased customer retention and long-term financial impact, underscoring the importance of robust security measures and proactive fraud prevention strategies.
Using a Credit Card Scanner to Mitigate Fraud
Card scanning helps prevent account takeovers by requiring the user to scan a card already linked to their account. This acts as a form of two-factor authentication, with one of the factors being a physical card known to belong to the legitimate account holder.
This method is particularly effective in cases of account takeover because it allows businesses to verify the user’s identity without resorting to more drastic measures, such as banning the account entirely. Unlike blocking a fraudulent account with a stolen credit card, banning a legitimate account that has been compromised could inadvertently lock out the rightful user. Card scanning ensures the original account holder can regain access while keeping unauthorized users out.
By requiring a physical card for certain transactions, businesses can deter fraudsters who may have compromised digital accounts but lack access to the card. This measure can be applied selectively to transactions deemed high-risk, preventing unauthorized purchases and reducing potential financial losses.
Reduce Fraud in Under an Hour
DyScan is the market-leading credit card scanner that works on all credit cards. DyScan reduces payment fraud by verifying the physical presence of the card while facilitating payments.
Learn how you can scan 100% of cards, boost payment conversion by over 5%, and reduce fraud by over 50% with less than an hour of engineering work. Get a demo today.