Many words describe money: shekels, moolah, dosh, cash or even filthy lucre. We encounter it everywhere in our daily lives. It has evolved continuously over millennia: whereas people used to use seashells, grain, cattle or different precious metals, payments nowadays are made using paper and coins or digitally. The functions payment fulfils are always the same: a medium of exchange, a unit of accounting or a method for storing value. However, one thing has not changed since means of payment were first used. Large sums attract fraudsters and criminals. Read on to learn how to protect yourself against fraud attempts in the digital age:
A Brief History of Money – From Ancient Times to the Digital Age
An early form of money was called commodity money, which was used back in ancient agricultural societies. This primitive means of payment – also known as ‘shell money’ – usually involved a product that also has an intrinsic value of its own in addition to its exchange value. For instance, clams, grain or cattle could also be consumed. The drawback of this type of currency was that it had no universally accepted value. This changed with the introduction of precious metals as a means of payment because their value could be accepted as relatively stable.
However, the development of coins was a fairly long process, and it is highly likely that different types of coins were adopted independently of each other. The Lydians in Asia Minor were the first to introduce coins in the middle of the 7th century B.C. Up until the 19th century, all sorts of coins, such as hellers, groschen or thalers, were used in German-speaking countries.
In Europe, the first banknotes were developed alongside ‘hard currency’ from the 17th century onwards. The introduction of these notes coincided with the emergence of the central banking system. During the 18th and 19th centuries, national banks, such as the Bank of England, the Banque de France and the Reichsbank in Germany, were established in Europe.
Towards the end of the 20th century, there was another upheaval when the growth of digitalisation led to financial transactions increasingly being processed electronically. In addition to officially recognised and regulated means of payment, purely digital currencies – known as cryptocurrencies – started to appear. Investors in cryptocurrencies place their trust in the underlying technology – the blockchain – and not in a central authority, as is the case with fiat currencies or currencies issued by governments. Probably the best-known example of a cryptocurrency is Bitcoin. It is based on a decentralised transaction system. Payments can only be made P2P, from person to person and – unlike other currencies – no banks or other financial institutions act as intermediaries between the sender and the recipient. In addition to Bitcoin, it is estimated that there are well over 22,000 other cryptocurrencies currently in existence.
However, payment fraud has also evolved in the same way as money. Whereas crooks used to forge coins (counterfeit currency), they now take control of accounts, use sophisticated phishing methods or manipulate account holders with social engineering attacks.
Stop me if you can
On 24 November 1971, just before Thanksgiving, a man named Dan Cooper boarded a Boeing 727-051 operated by Northwest Orient Airlines along with 36 other passengers and six crew members. The aircraft was scheduled to fly from Portland, Oregon, to Seattle, Washington. When the flight attendant took Dan Cooper’s drinks order, he handed her an envelope and whispered: ‘Miss, you’d better look at that note! I have a bomb.’ Indeed, the flight attendant found a note bearing the following words: ‘I have a bomb in my briefcase. I am prepared to use it if necessary. I want you to sit down next to me.’ The man demanded $200,000, four parachutes and a fuel truck to refuel the aeroplane. His demands were ultimately met. Dan Cooper jumped out of the aircraft with the ransom money and has not been seen since. All the investigators recovered after the parachute jump was three bundles of weathered banknotes and part of a sign that probably came from the rear part of the aeroplane steps from which Cooper jumped. The escape was truly spectacular, and the case remains unsolved to this day.
When it comes to money, criminals will make the most cunning and spectacular attempts to get their hands on it. The ongoing rise of digitalisation is increasingly opening up opportunities for fraudsters to steal money. Scarcely a day goes by without media reports about (successful) attempts by hackers and fraudsters to pilfer large sums of money. And the list of spectacular scams grows ever longer: Carbanak as well as the hack on the world’s largest Bitcoin exchange, Mt.Gox, OneCoin, PlusToken, or the money laundering scandal involving digital payments system Liberty.
The tricks employed by criminals are varied and have evolved in lockstep with our payment systems and currencies. Companies and private individuals are also targeted by hackers who have set their sights on one thing: their money.
It seems that the digital age has made life easy for cybercriminals.
Digital protective measures: even simpler, even stronger
The development of digitalisation has also made it easier for cybercriminals to access personal and sensitive data. In the same way, as in the case of Dan Cooper, cybercriminals use (real) identities and attempt to hack into accounts or make fraudulent transactions. This is why it is so important to take protective measures that will make internet payments convenient and secure.
When 3D Secure 2.0 was introduced in 2019, an additional level of security was established that guarantees an improved authentication process. The additional level ensures a convenient and secure online shopping experience for retailers and customers alike. However, the development of Strong Customer Authentication (SCA) goes even further. The European Commission has announced a review of Payment Services Directive 2 for 2022 that will address the use of improved SCA for instant payments as one of the key points. This shows that security measures are also keeping pace with the development of money.