How Paystack protects your business from cyber fraud

Online payments enable ambitious companies in Africa to accept payments from customers safely and securely, no matter where they are in the world.

However, like all good things, online payments come with risks—including cyber fraud.

Cyber fraud continues to rise both in Africa and globally, as bad actors adopt increasingly sophisticated tactics to target vulnerable businesses and individuals. With threats evolving daily, it’s more important than ever for businesses to implement proactive, robust measures to stay ahead of cyber risks.

Paystack helps protect merchants from fraud through comprehensive security and fraud prevention features. In this blog post, we’ll introduce some of our key security tools, show you how to use them to reduce your fraud risk, and share practical tips to help safeguard your business.

The growing threat of cyber fraud

Cyber fraud is an online threat in which attackers use the internet to deceive individuals or businesses to steal money, sensitive information, or account access. As technology advances, cyber fraud has become a persistent risk for anyone using the internet—whether for shopping, banking, or running a business.

To understand the scope of this threat, here are some of the most common types of cyber fraud affecting businesses today.

Synthetic identity fraud

Synthetic identity fraud occurs when a fraudster creates a fake identity by combining real and fabricated information, such as a genuine National Identification Number with a fake name, date of birth, or address. This “synthetic” identity appears legitimate but doesn’t belong to any real person.

Bad actors use these identities to open bank accounts, apply for loans, or carry out other financial crimes. Financial systems may approve these applications, unknowingly allowing bad actors to build credit histories under synthetic identities and ultimately withdraw large sums without intent to repay.

This type of fraud is challenging to detect because it doesn’t link to a real individual, making businesses vulnerable to significant financial losses.

Chargeback fraud

Chargeback fraud or “friendly fraud” occurs when a customer makes a legitimate purchase but then disputes the transaction with their bank to receive a refund. They may falsely claim they didn’t authorize the purchase, didn’t receive the item, or that the item wasn’t as described.

Chargeback fraud is costly and labor-intensive for businesses, as it requires gathering evidence to dispute the claim with payment processors. Recurrent cases can lead to penalties, increased transaction fees, or even account suspension.

For example, in 2023, a large payment’s company in Nigeria reportedly lost up to ₦30 billion to chargeback fraud due to a system glitch, highlighting the potential scale of financial losses that businesses can face.

Internal threats

Internal threats originate from individuals within a business, such as employees or contractors, who misuse their access privileges. Examples include an employee stealing customer data to sell externally, or manipulating financial records to commit fraud.

These threats are challenging to detect as insiders have a deeper understanding of company operations. Without adequate controls, businesses can suffer severe consequences, including financial losses, regulatory fines, and reputational damage.

For example, an employee of one of Nigeria’s largest banks reportedly diverted up to ₦40 billion into 98 bank accounts he classified as beneficiaries. Similarly, in Kenya, a staff member of the country’s largest bank allegedly collaborated with bad actors to defraud the bank of up to $2.1 million.

Phishing attacks

Phishing remains one of the most common cyber threats, where attackers impersonate trusted entities like banks or well-known companies to trick individuals into revealing sensitive information. These attempts often come through emails, SMS messages (“smishing”), or fake websites resembling legitimate ones.

Victims may be lured into sharing login credentials, ATM PINs, or financial information. The consequences for businesses can be severe: a single employee falling victim to a phishing attack could expose company accounts, customer data, and proprietary information, leading to significant financial and reputational damage.

Beyond financial losses, these types of fraud erode customer trust and harm a company’s reputation. Many incidents go unreported due to reputational concerns, which can worsen the problem by limiting awareness and collaboration. Proactive fraud prevention is essential, and Paystack is dedicated to helping businesses stay protected with tools designed to secure operations.

Paystack security features for fraud prevention

To help protect your business from cyber fraud, Paystack offers several security tools designed to secure your account, transactions, and customer data.

IP whitelisting

IP whitelisting is a security feature that allows you limit access to your Paystack account to only a specific list of trusted IP addresses. It lets you control which computers or networks are allowed to interact with your business account, even if they have your secret key.

A secret key is like a private password that only your business and Paystack know. It’s used to authorize transactions and requests, ensuring they’re coming from a trusted source. If someone outside your business gains access to your secret key, they could potentially make unauthorized requests.

IP whitelisting makes it such that even if a request is made using your secret key, Paystack checks if it’s coming from a whitelisted IP address. If the IP address isn’t on your list of trusted sources, the request is automatically blocked, preventing unwanted access.

IP whitelisting is particularly valuable for businesses handling sensitive financial transactions, as it helps secure your account from unknown or malicious sources.

To enable IP whitelisting, go to the API Keys and Webhook Settings tab in your Paystack Dashboard and add up to ten IP addresses for each environment (live and test). Also, refer to our comprehensive support article, which will guide you through the setup process.

Once activated, this security measure forms a crucial barrier, protecting your business from potential threats and ensuring compliance with industry best practices.

Two-factor authentication (2FA)

Two-factor authentication (2FA) adds an extra layer of security to your business account. Instead of relying solely on a password, 2FA requires a second step to verify your identity—usually a unique code sent to your phone or generated by an authentication app. This means that even if someone has your password, they can’t access your account without also having your phone or authentication device.

To protect your account and transactions, we strongly encourage all Paystack Dashboard users to enable 2FA across their integration. This added security makes it significantly harder for unauthorized users to gain access, even if they manage to steal your password.

We especially recommend using Paystack Passkeys with 2FA. Passkeys let you securely log into your Dashboard using biometrics like face recognition, fingerprint, or screen lock, so you don’t need to remember or manage passwords.

To set up Passkeys, go to the Profile tab on the Settings page of your Paystack Dashboard, scroll to the Authentication section, and click “Add a passkey.”

Role-based access controls

Role-based access controls allow you to manage permissions for each user on the Paystack Dashboard based on their role within your organization, ensuring that only authorized individuals can access sensitive data and perform critical functions. It reduces the risk of internal fraud and unintentional errors by restricting access according to specific job responsibilities. Paystack provides six default roles—Admin, Operations, Developer Support, Customer Support, Direct Debit Admin, and Signatory—each with distinct permissions tailored to different levels of responsibility.

If the default roles do not fully meet your organization’s needs, you can create custom roles by selecting specific permissions through the Team tab on the Dashboard. To get started and for setup instructions on assigning or customizing roles, please refer to the “Manage Roles” section in your Dashboard as well as this support article.

Transfer approvals

To protect your account from unauthorized transfers, Paystack offers secure approval options, including One-Time Passwords (OTP) and URL-based approvals. These features act as a safety net, requiring a final verification step before money can be transferred from out of your Paystack account.

With Transfer OTP, a unique code is sent to your email or to a specified device, like your phone. An authorized user must enter this code to complete the transfer. This ensures that only someone with access to your secure device can approve transactions.

For a faster, hands-off option, URL-based approvals send a secure link to the approver. With a quick click, the approver can either confirm or reject the transfer request. This is ideal for businesses managing multiple transactions, as it requires minimal manual intervention while still ensuring security.

By setting up these approval methods, you can keep your business safe from unauthorized transfers and gain control over your high-value transactions. For detailed setup instructions, refer to our transfer approval guide.

Risk Assessment Management System (RAMS) works behind the scenes to prevent fraud

Beyond these readily accessible features, Paystack also has some extra fraud detection and remediation tools that work continuously behind the scenes to identify and mitigate risks.

One of these safeguards is our Risk Assessment Management System (RAMS), an in-house fraud detection and prevention tool that operates quietly in the background.

RAMS uses a smart set of rules customized for each payment type, looking at details like transaction patterns, business profiles, and industry norms to spot potential risks. By tracking each step of every transaction, RAMS makes quick decisions on whether a transaction should go through or if it needs further review, giving your business strong protection at every stage.

Comprehensive fraud remediation process

While Paystack’s Risk Assessment Management System (RAMS) is effective at catching and flagging potential fraud in real time, some cases require a deeper level of support. To help merchants facing elevated fraud levels, Paystack has also established a proactive fraud remediation process.

Our team regularly monitors fraud patterns for each merchant and sets tailored fraud thresholds based on factors like business size and industry. For example, a large lending business may have higher fraud ratios due to frequent fraud reports from customers who don’t recognize loan repayment charges. We account for these unique factors when setting limits for each business.

Some key metrics Paystack monitors for each merchant include:

Fraud Value: This is the total value of transactions reported as fraudulent within a specific timeframe.

Fraud Ratio: This is the percentage of the total transaction value that is reported as fraudulent over the same period.

Our automated system continually calculates each merchant’s fraud metrics and flags accounts that exceed the set thresholds for immediate review. If a merchant’s fraud metrics cross these thresholds, we start a collaborative, hands-on process to bring fraud levels back down to acceptable limits.

This step-by-step process includes:

Notification: Paystack notifies the merchant of any breach of fraud thresholds.

Engagement and investigation: Our fraud team collaborates with the merchant to identify the root causes of elevated fraud metrics.

Remediation: Together, we develop a targeted action plan to address vulnerabilities, complete with a timeline for implementation.

Monitoring: After the remediation steps are implemented, Paystack continues to monitor the merchant’s fraud metrics to ensure sustained improvement.

This approach helps merchants reduce fraud, protect their customers, and strengthen their overall security posture.

Other tactical steps businesses can take to protect against risk

While Paystack’s processes provide a robust layer of defense, it’s helpful for businesses to implement proactive steps on their own to further reduce cyber fraud risks and reinforce their internal security practices.

Enforce strong KYC requirements for your customers

KYC, or “Know Your Customer,” is the process of verifying customers’ identities to prevent fraud and comply with regulatory requirements. Effective KYC involves collecting essential information—such as names, contact details, and national IDs—and verifying them against official databases.

For example, Nigerian businesses may use the Bank Verification Number (BVN) to confirm identities, while businesses in Ghana might use the Tax Identification Number and those in South Africa the South African ID number. In Kenya, acceptable KYC documents include National Identity Cards, passports, and driver’s licenses.

Implementing strong KYC practices not only helps your business meet legal requirements but also reduces the risk of fraud by ensuring you know who you’re transacting with.

Use complex passwords or passphrases

Setting complex passwords is a vital yet often overlooked step in protecting business accounts from unauthorized access. Strong passwords use a mix of uppercase and lowercase letters, numbers, and special characters, making them harder for attackers to guess or crack. Alternatively, a passphrase—a memorable sentence or phrase from a song, book, or movie—can also be effective.

When providing temporary access to your dashboard for external parties like developers or consultants, if you must share credentials (though not recommended), change the password immediately afterward to maintain security. Enforcing strong password policies makes it more difficult for unauthorized users to breach accounts, protecting customer data and financial information.

Build rule-based fraud detection systems

A rule-based fraud detection system is a security tool designed to identify potentially fraudulent activity. It relies on predefined rules or conditions based on patterns or behaviors often associated with fraud, such as multiple transactions within a short period or the use of several different payment methods from the same account.

When a transaction meets any of these preset rules, the system automatically flags it for review, sometimes by holding the transaction until it can be verified. Businesses can benefit greatly by developing these tools or processes internally, tailoring them to their specific risks and transaction patterns.

Implementing a rule-based detection system provides an early line of defense against fraud by catching unusual patterns that may not be immediately noticeable to humans. These systems can operate in real time, allowing your business to pause or review suspicious transactions before losses occur.

Segregation of Duties (SoD)

Segregation of Duties (SoD) is a security practice designed to ensure that no single individual has control over every step of a critical task. By dividing responsibilities among multiple people, SoD helps prevent fraud by ensuring that sensitive actions—like initiating and approving a payment—cannot be completed without oversight from others.

For example, in implementing SoD, businesses can assign access privileges based on each user’s role. Only the business owner might have full admin rights, while other team members are given permissions specific to their responsibilities. This way, no one person has unchecked control over high-risk actions, reducing the likelihood of fraudulent activity and promoting accountability within the organization.

Establish strong treasury practices

Strong treasury practices involve regular monitoring and reconciliation of financial accounts to ensure all transactions are legitimate. By tracking all incoming and outgoing funds, businesses can quickly detect discrepancies that might indicate fraud or unauthorized access.

Often, fraud goes unnoticed until it shows up in financial statements at the end of a month, quarter, or year. With strong accounting frameworks in place, unusual money movements can be detected and addressed early, minimizing potential losses.

Conduct regular checks on your security systems

Businesses should regularly conduct infrastructure and security system audits. Doing this ensures that security measures put in place to detect fraud and other risks are effective and up-to-date.

Engaging internal or external auditors to review high-risk areas of your business also identifies potential vulnerabilities before they can be exploited. These audits check if current security protocols are sufficient and can reveal gaps that might not be obvious in day-to-day operations. High-risk workstreams, such as payment processing and data handling, should be reviewed frequently to ensure no vulnerabilities go unchecked.

Stay on top of chargebacks to prevent friendly fraud

Chargebacks are a safety net for customers, allowing them to dispute transactions and request refunds when something goes wrong with their order or service. This process, overseen by card networks like Mastercard and Visa as well as local regulatory bodies, is designed to protect consumers. Customers file disputes with the goal of reversing charges.

For merchants, chargebacks present both a challenge and an opportunity. They have a limited window to respond, either by accepting the chargeback or providing evidence to dispute it. If the merchant doesn’t respond within the specified timeframe, the chargeback is automatically accepted, and the refund is processed. This can lead to financial losses, even if the merchant has fulfilled their end of the transaction.

To minimize these risks, businesses must stay on top of chargebacks to ensure that they’re resolved quickly. Paystack helps by sending immediate email notifications when a dispute is raised, followed by reminder emails every four hours until the issue is resolved. This ensures merchants stay informed and can take timely action.

Friendly fraud—when customers misuse the chargeback process to get refunds for valid purchases—has become increasingly common. For instance, a customer might falsely claim they didn’t receive an item to trigger a chargeback. If businesses fail to respond promptly, they risk losing revenue unfairly. By actively monitoring and resolving chargebacks, merchants can close this loophole, protect their income, and maintain a healthier financial position.

Keep systems updated and patched

Regularly updating and patching software on devices used to access the Paystack Dashboard is essential for security. Software updates often include patches for vulnerabilities that attackers could otherwise exploit.

By keeping your operating system, applications, and security software up to date, you close security gaps that might otherwise expose your systems to unauthorized access.

Safeguard your business using Paystack

At Paystack, we’re committed to helping you stay one step ahead with a comprehensive suite of security tools and proactive fraud prevention measures. These features not only safeguard your revenue but also strengthen customer trust and loyalty, giving you a competitive advantage in a world where data security is highly valued.

However, true security is a shared responsibility. While Paystack provides built-in defences like IP whitelisting and two-factor authentication, these features work best when actively used by you and your team. By adopting strong internal practices—such as enforcing KYC, using complex passwords, and conducting regular security audits—you play a vital role in building a resilient defence against evolving threats.

We encourage you to explore the security features available in your Paystack Dashboard, activate essential tools, and establish a regular fraud prevention review process.

Together, let’s create a secure and resilient digital ecosystem where your business can thrive. For any questions on enhancing your security measures, reach out to our team at [email protected]—we’re here to help you protect what matters most.