What is Payment Fraud?

In recent years, payment fraud has surged dramatically. Losses from online payment fraud rose from $17.5 billion in 2020 to an estimated $48 billion in 2023. This issue impacts businesses across all sizes and industries, but it’s one that can be mitigated with effective fraud prevention measures. The more you understand payment fraud, the better equipped you’ll be to prevent it.

So, what exactly is payment fraud? Payment fraud involves the unauthorized manipulation of payment systems to illicitly obtain, spend, or transfer funds. It compromises the integrity of financial transactions and endangers the security of both personal and business information.

Payment fraud is generally divided into two categories: card-present (CP) fraud and card-not-present (CNP) fraud. CP fraud occurs when the physical card is used during a transaction, commonly in brick-and-mortar retail environments. In contrast, CNP fraud happens when transactions are made without a physical card, typically online or via phone, and it is by far the more prevalent of the two types.

Certain industries are more susceptible to payment fraud than others. For example, hospitality, digital businesses, retail, banking and finance, and healthcare are a few of the industries at risk from payment fraud. From financial losses to chargeback fees, reputational damage, and legal and regulatory consequences, payment fraud impacts businesses in many different ways.?

Robust fraud prevention software is the best way to minimize your risk of payment fraud. Other good ways include multi-factor authentication, using reputable payment processors, and educating your employees and customers.

Get a deeper dive into payment fraud and protection mechanisms here.?