Payment fraud – how bad is it in Canada?

Payment fraud – how bad is it in Canada? | Insurance Business Canada

Cyber

Payment fraud – how bad is it in Canada?

Poll sheds light on the risks for businesses

Cyber

By
Terry Gangcuangco

A Payments Canada study has revealed that Canadian businesses are more vulnerable to payment fraud than consumers, with 20% of businesses reporting incidents compared to 13% of consumers. The most common types of fraud include impersonator scams, intercepted e-Transfers, and credit card fraud.

The survey noted that most businesses (63%) reported losses of $3,000 or less. Despite the steady fraud rate of 19% from the previous year, 63% of businesses expressed confidence in their ability to protect themselves, while 61% said they were more aware of potential threats.

Larger commercial enterprises experienced a notably higher rate of fraud at 26%, surpassing medium-sized businesses (23%) and small businesses (16%).

Impersonator scams, where fraudsters impersonate a trusted source to request money, accounted for 25% of incidents. Other common schemes involved the interception of e-Transfers (22%) and fraudulent charges on credit cards (20%).

The study also noted a rise in suspicious activities, with 45% of businesses observing more fraud attempts through email over the past year. These incidents were also increasingly prevalent on smartphones (42%), social media (39%), and e-commerce platforms (34%).

In response, many businesses are taking measures to safeguard themselves. Nearly 70% of businesses limit the sharing of sensitive data online and are cautious when using e-commerce sites. Around 65% of businesses have also adopted two-step authentication for added security when accessing accounts.

However, the report highlighted gaps in password security practices. Over 40% of commercial businesses and 39% of small and medium-sized enterprises store their passwords on personal devices, and many use the same password for multiple accounts, further exposing them to risks.

The survey, conducted by Leger from March 25 to April 5, 2024, gathered insights from 500 Canadian businesses.

Donna Kinoshita (pictured), chief payments officer at Payments Canada, noted: “Addressing fraud risks is a central focus for the payment ecosystem. It requires a multifaceted approach that leverages technology, system innovations, evolving regulations, and education through continued industry collaboration.”

She emphasized future innovations such as biometrics, AI-based (artificial intelligence) fraud detection, and enhanced data-sharing systems as key tools for tackling payment fraud.

Despite the fraud threat, most businesses have confidence in their financial institutions. Seventy percent (70%) of businesses that experienced fraud were either fully or partially reimbursed by their bank, credit union, or credit card provider. Of those that lost money, 32% were fully compensated, while 39% received partial reimbursement.

“Businesses face the challenge of ever-evolving and increasingly sophisticated payment fraud and cybercrime threats,” added Jon Purther, research director at Payments Canada. He stressed the importance of proactive fraud prevention measures across all sectors and company sizes.

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