Fraud risk in electronic payment transactions

Abstract

Purpose The purpose of this paper is the timely review of regulations on the security of electronic payments, payment innovations and their vulnerabilities and discussing the recommendations elaborated by the European Forum on the Security of Retail Payments. Design/methodology/approach First, the article presents a serious fraud case which happened in the Hungarian banking system. This case demonstrates all risks associated with the security of payment channels being used. Next, the article examines those international SecuRe Pay Forum recommendations which target the elimination of such fraud risks. Finally, the article compares current domestic regulations with these recommendations. Findings The fraud incidents and the speed of penetration of new fraud techniques and methods caught the attention of payment service providers, customers, supervisors and overseers. The result of their cooperation is the European Forum on the Security of Retail Payments. The forum elaborated three sets of recommendations on security of Internet payments, payment account access services and mobile payments, which are missing elements of the present Hungarian and pan-European regulations. Both domestic and international regulators should build on the revised Payment Services Directive and the recommendations in question, to avoid fraud incidents like the one this article initially portrayed. Originality/value The article presents a specific, true case which took place in Hungary in 2014.