What Payment Fraud Means; Its Types and Simple Ways to Prevent them

suspicious email warning on payment fraud through phishing

Payment fraud is a risk that affects everyone, from individuals managing personal finances to small businesses and large corporations handling complex transactions. It isn’t just about high-profile cyberheists; it can show up as subtle unauthorized charges, disputed payments, or manipulated invoices. The consequences are serious, ranging from financial loss to reputational damage and operational disruption.

Understanding what payment fraud looks like, the common methods used by criminals, and how fraud protection and fraud detection can help secure your transactions can make all the difference. With the right knowledge and precautions, you can reduce risk and stay ahead of evolving digital payment threats.

Stay Ahead of Payment Fraud

In this article

What Payment Fraud Means; Its Types and Simple Ways to Prevent them

What Payment Fraud Actually Means

At its core, payment fraud refers to any act in which someone misuses payment methods (cards, digital wallets, bank transfers, checks, etc.) to obtain money or goods illegitimately. Implementing fraud protection and strong fraud detection measures can reduce exposure.

To put it into perspective:

In 2024, about 79 % of organizations reported being victims of attempted or actual payments fraud.
Between 2023 and 2028, online payment fraud losses globally are projected to exceed US$362 billion.
Consumers lost more than US$12.5 billion to fraud in 2024, a jump of ~25 % year over year.

Essentially, payment fraud includes all the ways criminals try to exploit payment platforms to get unauthorized access to money.

Common Types of Payment Fraud (and What They Look Like)

Understanding the main types of payment fraud helps identify red flags early.

1. Phishing & Social Engineering

Fraudsters pose as trusted brands or colleagues to steal payment data or credentials, often via email or text. Once they gain access, they initiate unauthorized transactions.

2. Skimming & Contactless Theft

Devices placed on ATMs or POS terminals capture card details. In contactless theft, criminals use RFID scanners to wirelessly read card info from nearby wallets.

3. Identity Theft & Account Takeover

Here, attackers steal personal information to open new accounts or hijack existing ones. Once inside, they perform transactions under your identity, a growing issue in digital banking and wallet apps.

4. Card-Not-Present (CNP) & Card Testing Fraud

In online or mobile payments, the card isn’t physically presented, making it easier for stolen data to be used. Card testing happens when fraudsters run small transactions to check if a stolen card still works.

5. Chargeback or “Friendly” Fraud

A customer disputes a legitimate charge claiming it wasn’t authorized or the product never arrived. Businesses lose money and products in the process.

6. Business Email Compromise (BEC) & Invoice Fraud

Fraudsters infiltrate company email chains, sending fake invoices or changing payment instructions. This kind of payment fraud targets trust between businesses.

7. Push Payment Fraud

Victims are tricked into sending money themselves, believing it’s a legitimate request. Even though they authorize the payment, it’s still fraud.

8. Check & Paper-Based Fraud

Even in 2025, 63% of organizations still report check fraud (AFP). Criminals forge or alter payee details or intercept mailed checks.

9. Emerging AI-Driven Attacks

New threats include synthetic identity fraud and deepfake-based scams, where AI-generated voices or IDs bypass traditional fraud detection systems.

Why It Matters — The Real Cost of Payment Fraud

The cost of payment fraud goes beyond the money stolen.

Financial loss: Chargebacks, legal costs, and operational downtime add up.
Reputation damage: A single incident can erode years of customer trust.
Operational stress: Businesses face increased audits, controls, and compliance burdens.
Regulatory risk: Poor fraud protection can result in penalties under data and payment laws.

Only 22% of affected companies manage to recover more than 75% of losses

Enable Fraud Protection Features

Simple and Practical Ways to Prevent Payment Fraud

Preventing payment fraud starts with layered defences, not just technology, but people and processes.

1. Strengthen Authentication & Access

Enable multi-factor authentication (MFA) everywhere.
Enforce strong, unique passwords.
Limit access privileges by role.
Monitor logins for unusual activity.

2. Transaction Monitoring & Fraud Detection

Flag abnormal transaction patterns (unusual size, location, or speed) and use 3D secure verification for online payments to confirm legitimacy and reduce CNP fraud risk.
Use AI-powered fraud detection tools with risk scoring, combined with fraud protection policies like alerts and limits.
Apply velocity checks and IP blacklists.

These systems enhance fraud protection by spotting irregularities in real time.

3. Vendor & Invoice Verification

Confirm vendor details via verified channels.
Require dual approvals for large payments.
Keep vendor lists updated and secured.

This reduces invoice manipulation and BEC attacks, two of the costliest forms of payment fraud.

4. Transparent Dispute & Refund Policies

Use recognizable billing names.
Keep clear proof of orders and deliveries.
Maintain transparent refund policies to limit friendly fraud.

5. Employee Awareness & Education

Human vigilance is crucial for fraud prevention.
Train teams to detect phishing, verify requests, and pause before confirming payments. Run internal phishing simulations and reward alert behavior.

6. Encryption & Tokenization

Protect sensitive data by encrypting it in transit and at rest.
Tokenization replaces real card numbers with random tokens, making stolen data useless.
Add 3D Secure layers for online transactions to confirm legitimacy.

7. Leverage Insurance & Fraud Services

Some payment gateways offer chargeback insurance or real-time fraud scoring. Combining internal and external safeguards gives stronger protection against payment fraud.

Protects every payment you make!

Strengthening Security with 3D Secure and Fraud Protection Layers

Layered fraud protection and 3D Secure authentication for safer payments

Here’s how an organization might combine several of these to build a fraud-resilient posture:

Layer	Purpose	Example Control
Identity / Access	Prevent credential misuse	MFA, strong passwords, least privilege
Payment gating	Intercept suspicious payments	Risk scoring, velocity checks, flags
Vendor gateway	Prevent invoice / BEC fraud	Dual approvals, vendor verification
Transaction defense	Protect at runtime	Encryption, tokenization
Post-event controls	Recover & learn	Chargeback procedures, audits
Culture & training	Strengthen human barrier	Awareness training, phishing drills

If implemented well, these controls significantly reduce your exposure to payment fraud.

Stop Identity Theft Now

How Bycard Reduces Payment Fraud and Protects Against Identity Theft

Identity theft attempts targeting online payments

The shift toward virtual cards, wallets, and online transfers means security must evolve too. That’s exactly where Bycard leads, with technology built around fraud protection, fraud detection, and identity theft prevention.

Built for Fraud Prevention

Bycard’s system layers multiple defences at every transaction point:

Virtual Card Control: Instantly create, freeze, or delete cards to neutralize stolen details.
Dynamic Card Numbers: Each transaction generates a unique card number, ideal for preventing CNP fraud.
Real-Time Alerts: Every payment sends an instant notification, letting users catch unauthorized actions immediately.
3D Secure & Encryption: Strengthens transaction authentication and keeps data hidden from malicious actors.

These features make Bycard a strong choice for anyone who wants fraud protection that’s proactive, not reactive.

Conclusion

Payment fraud is constantly evolving, but awareness and the right tools make all the difference. Understanding how different fraud types work, whether it’s phishing, card skimming, or identity theft, helps individuals and businesses stay alert. Still, awareness alone isn’t enough. Prevention needs to be built into the way we pay.

That’s why tools like Bycard matter. By combining fraud protection, fraud detection, and advanced security layers like virtual cards, encryption, and 3D Secure, and safeguards against identity theft. Bycard helps users take control of every transaction. Instead of reacting to fraud after it happens, you’re equipped to stop it before it starts.

Frequently Asked Questions

1. What is payment fraud and how does it happen?

Payment fraud occurs when someone misuses payment methods, cards, digital wallets, bank transfers, or checks, to take money or goods illegally. It often involves stolen credentials, phishing, or identity theft.

2. What type of payment fraud happens most?

For online transactions, card-not-present fraud dominates. For companies, BEC and invoice manipulation remain major threats.

3. What’s the first step to protect against identity theft?

Start with MFA, enable card alerts, and use virtual cards, core fraud protection tools features Bycard provides to prevent identity theft and support fraud detection.

4. How do we balance friction vs security?

Security measures need to be as light as possible but as strong as necessary. For low-risk transactions, minimal verification; for high-risk, extra checks. Monitor false positives to fine-tune thresholds.

5. Does a small business need all these controls?

You don’t need enterprise tools from day one. Start with MFA, transaction rules, staff training, and audit logs. As you grow, layer in more controls.