Best Ways to Be Aware and Avoid Scams in Online Finance

Online payments and internet banking have made life easy for customers. Users can now make basic financial transactions at their fingertips and do not need to be physically present at banks or exchange money in cash. However, users are also falling prey to various types of financial frauds. As more financial services go online, scams in the online financial industry have also increased. From email phishing to discounting scams and deceiving apps, an increasing number of people experience different types of financial fraud.

A 2019 year-end McAfee survey of more than 1,000 Indian adults showed that ~53.6% of Indians fell prey to different types of financial fraud scams from deceiving apps in the festive season. Further, 25.3% of the respondents said they were victim to email phishing and 21.1% to text phishing.

Although common, most types of financial frauds occur because users do not know how to prevent fraud. The main reason for this is the lack of awareness among users. Many unsuspecting users click on random links and entertain calls from suspicious entities, and end up losing their money. Another common problem among new users is that they do not protect their data and devices, leading to various types of financial fraud.

Let us understand the different types of financial frauds that occur around us and how to avoid being scammed online.

1. Phishing: Phishing is a type of financial fraud where a fraudster attempts to steal your personal banking information like customer ID, password, debit card or credit card details via email and misuses this information. In Phishing, the fraudster may try to get you to install malware – software that can steal your data. For example, emails are sent by people who pretend to be a known or trusted source and often ask you for sensitive and personal information. In this case, you must secure your devices and only open emails from legitimate sources.
2. Smishing and Vishing: Smishing is a type of fraud that may affect mobile banking users. This happens when you receive a fake text message from the fraudster asking for your bank account details. Vishing is a fraud wherein a fraudster calls you to reveal your personal and financial information over a call. Asking for OTPs has also become a common way to fraud people.
3. Online shopping frauds: This is one of the most common among the different types of financial frauds over the past few years. Here, fraudsters make fake online shopping sites or apps and typically display products at deeply discounted rates. After you purchase a product and pay the money, either the product is not delivered at all or you receive a fake product. Apart from this, these sites neither have refund/return policies nor customer support details.
4. Lottery and quick money scams: This is also common among various financial fraud types. A lottery scam may come to you as an SMS or email informing you that you have won a humongous amount, and, to claim your winnings, you would need to pay a small fee. Many unsuspecting customers get fleeced by this and end up paying the fee, never to hear back. Many companies also swindle investors by presenting false financial statements, as evidenced by recent financial statement frauds.
5. Credit card and bank loan scams: Hard to believe credit card offers and loan offers are also widely experienced financial fraud types. Many a time, you may also get offers for credit card limit enhancements and personal loans at extremely low rates. These unrealistic offers aim to steal your credit card and banking information such as PIN, passwords, CVV, etc. and misuse it to steal money.

Now that we are acquainted with different types of financial frauds let us look at how to avoid financial scams.

1. Secure your devices: The first thing you can do to avoid being scammed online is secure your devices. Using anti-spy and anti-spam software can help filter fraudulent emails from entering your inbox. A firewall on your system can help prevent unauthorized access to your computer via malware.
2. Exercise prudence before investing/buying: Recent financial statement frauds show that people often fall prey to schemes and companies that promise unrealistic returns. However, before you invest in a company/business, ensure that you conduct proper research. Further, check the authenticity of the site/app before buying products. Once you develop the habit of researching, you will know exactly how to avoid being scammed online.
3. Red flags to look for in emails, calls, and text messages: Always check who the call/text/email is from before responding. Further, if any sensitive or personal information is requested, it's time to become suspicious!
4. Change passwords periodically: It is a good practice to change your passwords regularly. Ensure that you use a combination of letters, numbers, and special characters. Also, avoid using commonly known facts about you like your birth date as a password.
5. Do not use public computers for financial transactions: If you are wondering how to prevent fraud, this one probably tops the list. Simply avoid using public computers for financial transactions as they may be infected with a virus or malware that can steal your information. Further, someone may even be peeking at your screen while you are entering information.

Ensure that you are aware of the different financial fraud types and how to avoid getting scammed before you transact online.