Bill Payment Fraud: How to Knock It Out in the First Round

While theft by fraudulent activity is not completely preventable, utilizing industry-leading early detection tools can minimize potential losses.




At first, when members hear about the possibility of fraud occurring with online bill payment accounts, their initial thought may be: “Who is going to steal my bill and actually pay that bill on my behalf?” In reality, of course, the fraudster’s goal is to access personal information in order to steal money from the member’s share draft or checking account. While theft by fraudulent activity is not completely preventable, utilizing industry-leading early detection tools can minimize potential losses.

Outsmarting Would-Be Fraudsters
Today’s sophisticated fraudsters are continuously creating complicated online fraud schemes. Identity theft can allow the fraudster access to information that will allow him to set up a fake biller and make a fake payment to another fraudulent party. Email phishing, for example, can include setting up a fake financial institution website, sending an email to your member asking him to verify his user name and password, and then, voilá, the fraudster uses the member’s user name and password to create a new bill payment account and sets up a fake biller with a fake payment. Using intelligent technology, fraudulent payments from identity theft and phishing schemes can be prevented.

Fraudsters also use malicious software, such as spyware or Trojan horse software, that secretly records user keystrokes and changes security settings. This provides them access into an online banking account that they use to siphon funds to a bill pay account. There is also “friendly fraud” which isn’t so friendly. This is when a family member or friend steals the user name and password for financial accounts and uses this information to make payments to accounts they control.

The good news is that early detection software will identify and prevent many of these schemes from occurring before payments are processed. Online bill payment fraud has been minimal compared to occurrences of plastic card fraud, but it’s important to stay one step ahead of fraudsters.

An Inside Look At Fraud Prevention
Every bill payment transaction is analyzed as it is scheduled and the potential fraud-risk is scored based upon a broad range of metrics. If the score is high, then a fraud “alert” is generated. The member is contacted before the payment is processed to determine if it is a fraudulent payment. Here are a few factors that are evaluated:

  • The identity of the user’s computer and the geographical location
  • The biller’s information
  • Identifying payments that are outside a member’s normal payment behavior
  • Suspiciously large payment amounts or frequency, for example, multiple payments to the same biller in a short timeframe

Tap Into Industry-Wide Intelligence
Continuous education is an essential element in fraud protection. Educate members about appropriate Internet behavior, which includes installing and regularly updating firewalls, anti-virus, spyware, and browser security software on their home computers. In addition, make sure they know your credit union will never solicit members’ name and passwords.

Beyond education, there are also fraud prevention solutions available. PayLynx, PSCU Financial Services’ online bill payment product, deploys CheckFree’s FraudNet, an industry-leading online bill payment fraud prevention solution. This tool leverages the collective intelligence of all participating network partners. These partners contribute to a massive file that includes fraudulent social security numbers, email addresses and account numbers. This intelligence gets more comprehensive and more powerful each time it is updated. Many of the nation’s largest financial institutions participate in this network.

Boosting Security Can Increase Subscriber Adoption
Consumers often identify security concerns as a major barrier to adoption of bill payment and online banking. Educating members and adding an effective security tool to your online bill payment solution can help alleviate these concerns and boost the confidence of subscribers for online banking and bill payment services.

Established in 1977, PSCU Financial Services provides member-owners with a broad array of cost-effective, high quality financial services that include debit, ATM, credit, prepaid cards, online bill payment and contact center solutions. For more information on how you can grow your credit union through a partnership with PSCU Financial Services, visit



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April 9, 2007


  • We need to be real carefull who the thieves really are. Consider when you make a bill pay from Wells or Chase they remove the money from your acount the minute you send it even if the check has days to be cashed. Hmmm...seems they are depositing into one of their own tomporary accounts to gain sone interest before paying it out when cashed...This is how middle America get dumped on! It really should be staying in your account till paid.
  • Outstanding article. Good job!
    Michel Perreault