Essay Sample on Payment Fraud: A Growing Menace for Organizations Worldwide

Introduction

Fraud within the payment system is a serious problem facing most of the financial and non-financial organization. From the many research conducted, it's evident that most organization incur huge losses associated with payment fraud. Payment fraud denotes the various activities and practices that fraudsters engage in to do transactions through the use of physical or non-physical channels. Some of the renowned methods used by such perpetrators include online transactions via methods such as phishing, scams related to wire transfer, credit cards, and identity-related theft and many others.

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The payment fraud has become so complicated, especially in the era of advancement in modern technology. Improved technology has made the transaction much more comfortable as opposed to the use of traditional methods. However, the use of such technology, i.e. phones, computers, tablets and other electronic gadgets makes it hard to eliminate fraud payment; since in most cases, the IP addresses cannot be tracked. The increase of such fraud has continued to affect the integrity, reputation and performance of most business among them being the JP Morgan and the Apple inch.

For instance, JP Morgan, a financial company, has indicated that there exist many transaction complexities as far as balancing of the account is concerned. The complications are as a result of the increase in business activity which is associated with high reports on payment frauds. Most importantly, Apple Inc. has classified payment fraud under the tricky act. The act puts emphasis on the various issues that have arisen as a result of using Apple products, i.e. tech-apps store, apple cards, among others. The use of such gadgets has engineered illegal transactions through the use of both physical and logical attacks, i.e. card skimming and card trapping.

As a result, many researches have been done to try and address the fraud payment problem.

Even so, most of this research has only focused on the aspects of financial services and the info-Tech sector. Such research generally puts into considerations the operations of the business, which relatively addresses the issues on customer's safety and protection. A study conducted in 2017 by Ikonen tried to address the fraudulent payment process by focusing on the critical aspects of the transaction methods used, i.e. the traditional and modern techniques. However, there still exist gaps in matters on an effective and efficient way of detecting, controlling and preventing fraud payment in the changing world. Indeed, most studies have addressed the following; the cost of illegal transaction on business integrity; fraud payment impact on market reputation; and the complexity associated with the fraud

However, most of the research has not provided long-lasting solutions on issues relating to the detection and prevention of scams in the payment system for both the financial and non-financial organizations. The proposed research will thus focus on the payment system to critically analyze the payment frauds; where, when, and how it's carried out. The study will also use various detection methods to develop and create valuable solutions to the on-going problem. The techniques will be backed up with the help of the machine learning algorithms which will help establish quick and effective control measure.

The proposed research intends to answer the following research questions; how is fraud payment executed in both financial and non-financial organization? How does the fraud affect the overall performance of these organizations? What are the current method of fraud detection, control and prevention in place and how effective are the available techniques as far as fraud payment is concerned?

Some of the existing theories that will form the essential part of the above research are the fraud triangle theory. The theory summarizes the three main aspects that make people commit a fraud; pressure, opportunity and rationalization. The theory states that every person faces some pressure, i.e. financial/non-financial pressures to commit a crime. On the other hand, the perceived opportunity is usually created by the governance system in place that is purported to be ineffective, allowing individuals to commit an organizational scam.

Rationalization element states that before someone indulges in unethical behavior, he/she must think critically and formulate some morally acceptable response to himself. Another theory that undergirds the above research is, the expanded version of Fraud triangle theory commonly known as fraud diamond theory, which comprises of four elements: incentive, opportunity, capability and rationalization. The theory argues that perceived pressure does go hand in hand with the existence of an opening (chance) and rationalization. The fourth element, i.e. capability, presents the need for a perpetrator to have the relevant skills and attributes before committing any crime.

Conclusion

The two theories are a critical aspect of the proposed research as they will help in understanding the various level of fraud concealed and its associated cost. The concepts within the theories will further help in identifying risk factors and the fundamental elements contributing to fraudulent acts. Practical approaches to fraud detection and prevention can then be put in place once the dynamics surrounding fraud payment are critically analyzed and the outcome well understood. Results obtained from the study will help in the following ways: adding into the frontier of knowledge as far as fraud theories are concerned. The findings will also provide more information on the fraud payment. Last but not least, the research findings will offer practical solutions for detecting, controlling and preventing fraud payments in both financial and non-financial organizations. The concepts under the theoretical framework will thus help form the basis for conducting a literature review on fraud; the effects; severity of fraud payment; gaps in the existing literature on fraud payment and finally the methods for detecting, controlling and preventing payment fraud (s) in organizations.