Since the Covid-19 outbreak, online trade has skyrocketed, with many retailers reporting a boom.And with this, the National Financial Ombud Scheme (NFO) admits to a spike in digital banking fraud complaints.
According to the NFO, in the first six months of last year, it received 1 436 complaints, but that number rose to 2 483 – a staggering 73% year-on-year increase – in the same period this year.
In contrast, ATM card fraud complaints, though rising, grew only marginally from 237 to 332. This data marks a dramatic shift in card fraud from the physical to the virtual realm.
And as this virtual shift ramps up its rapid takeover of the physical, so will the fraud, since virtual banking cards are now a standard feature across all digital banking platforms.
But what are virtual bank cards?
These are means of payment loaded onto phones and smartwatches to offer greater convenience compared to traditional plastic cards. However, this very digital revolution is creating a fertile new ground for fraudsters, leading to a dramatic surge in consumer complaints and significant financial losses.
Yet, the virtual card march will continue because the technology provides instant access through a secure banking app, allowing for seamless online shopping and in-store tap-to-pay transactions.
According to the NFO, though, these virtual cards are littered with security features, such as their own unique card number and card verification value, and cannot be physically “lost or stolen”; yet, the lead ombud for banking at the NFO, Nerosha Maseti, recently said it is clear they are not immune to crime.
“While virtual cards offer enhanced convenience and security, opportunities for fraudsters to exploit unsuspecting bank customers remain,” Maseti said.
The primary vulnerability lies not in the card technology itself, but in how fraudsters gain access to a customer’s entire digital banking profile.
Through vishing (phone scams), smishing (SMS scams), and phishing, criminals trick individuals into surrendering their confidential login credentials and one-time pins.
Once inside, the fraudster can easily create virtual cards and authorise transactions, often with the victim unknowingly approving the payments via in-app authentication messages.
Maseti said a consumer who lost R500 000 had been contacted by fraudsters pretending to be from her bank. Convinced by the vishing scam, she provided her online banking details.
The criminals then created multiple virtual cards and made online purchases, with the transaction approvals being sent to and accepted via the consumer’s own banking app.
The bank repudiated her claim, and the NFO ultimately agreed, finding that the consumer had compromised her own credentials and approved the transactions, with no fault on the part of the bank.
Alarmingly, Maseti noted that many complainants were unaware that virtual cards even existed on their profiles, despite banks’ awareness campaigns. This knowledge gap is being ruthlessly exploited.
So how do you protect yourself? The NFO suggested the following.
A bit of deja vu, so pay attention lest a criminal use your cash to pay for frivolous purchases online.
Never share confidential information
Your bank will never phone you to ask for your PIN, password or one-time password, so don’t be duped into sharing these with anyone.
Read authentication messages carefully
Before approving any transaction on your banking app, read the details. Do not just approve blindly.
Don’t panic
When fraudsters call you, they will create a false sense of urgency, threatening that your account will be blocked or alleging fraud to cause you to act hastily. Instead of acting on a call not initiated by you, call your bank directly.
View links with great suspicion
Do not click on links in unsolicited emails or SMSs. Credible institutions will not ask you to do this.
You have double locks behind your door at home; why not for your transactions?
Enable multi-factor authentication, use strong, unique passwords, and avoid making transactions on public Wi-Fi.
You suspect fraud; now it’s time to act swiftly
Report your suspicion to your bank immediately – only they can block your account and attempt to recover funds. If a dispute with your bank remains unresolved, you may then escalate the matter to the NFO.
Maseti warned that in the digital age, vigilance is the price of convenience.
