Strategy to Detect and Prevent Payment Processing Frauds

Imposter scam is the commonest type of payment fraud. A fraudster fakes someone else’s identity to obtain their sensitive data and use it to extract money. Online payments are a major target of hackers who extract payment data from users. When users send payment processing queries, the data travels across the web in packets.

It moves from one computer to another until it reaches its destination. As data moves across the internet, it can be intercepted and the packets extracted by fraudsters. Increasing data travel speed can help reduce or eliminate possibilities of interception. Organizations use different fraud detection and prevention strategies.

Using distributed computing to increase data speed

Distributed computing architecture increases scalability and performance. Companies leverage the performance advantage of IMDGs to create a centralized, single database that is scalable, reliable and distributed. It hosts all client applications data in RAM to make it readily available whenever needed.

Due to this, the amount of data processed daily increases in volume, velocity, and variability by thousands of times. Customers send millions of requests, and they get processed in milliseconds. This data super speed significantly minimizes the possibility of being intercepted during the payment processing phase.

How payment processing frauds happen

Online payments use a payment gateway account to authorize and transmit a transaction. It is the system that reads payment details and transfers them to the merchant’s bank. If a buyer is making payment for an online purchase, the gateway rests between the buyer’s and the seller’s bank.

That information must travel between the two banks through the payment gateway. Payment processing fraud happens while the data is traveling in between. Slower data speed increases the chances of being intercepted and redirected to pay to a different bank. The fraudster only needs to alter the receiving bank details at the gateway. They change not only the bank details but also the amount in some instances.

Commonest types of payment fraud

In a bid to increase sales, companies invest in multiple payment methods. They succeed on one end, but they have to deal with fraud challenges on the other end. The commonest types of payment fraud are three.

  • Clean fraud: Hackers study a company’s fraud prevention system using genuine but stolen payment data. It is harder to detect this type of fraud.
  • Identity fraud: A fraudster guises themselves as the real customer, but they intend to steal the real customer’s information.
  • Friendly fraud: An individual receives a product but denies ever receiving it. They initiate a refund claim, and they get it.

How to detect payment processing frauds

Enterprises lose billions of dollars to payment fraud each year. As the number of transaction channels increases, it is necessary to be vigilant and use highly effective fraud detection tools and strategies. Companies should be keen on noticing red flags on any suspicious transactions in their payment systems. There are many fraud detection strategies that businesses can use.

  • Check the shipping and billing address: If the two addresses do not match, there is a need to get concerned.
  • Multiple transactions made in a short time: Fraudsters seek to take maximum advantage of opportunities. They can make multiple payments using the same card number.
  • Unusually large order: One client can make a large order that raises suspicion. They can be the same type of items or different.
  • Rushed shipping request: A fraudster would want to have their order shipped as fast before the card owner reports. It is not always that rushed shipment is a fraud.
  • Suspicious international shipment: A client can purchase items that are available in their country, and there could not be much cost difference.

How to prevent payment processing fraud

Be up to date with fraud trends

Developers are creating new payment methods all the time. These present new opportunities for fraudsters to try their luck through security gaps. Using the latest technologies helps a company to stay up to date with current fraud trends and their mitigation solutions.

Use an automated fraud detection system

An automated fraud detection system uses AI algorithms to work behind the scenes and detect any suspicious activities. It can be programmed to act against the activity or alert the online security team for action. The system provides a company with several advantages.

  • Real-time detection: Automated systems scan large volumes of data in real time. It can detect suspicious behavior in real time and send a warning signal for action.
  • It works 24/7: Automated fraud detectors work nonstop, unlike human beings who might take a break. A one-minute break can give a fraudster all the time they need to steal information and use it to their advantage.
  • The system is improved consistently: Developers keep improving the software to the latest version for accuracy.

Implement security policies

Every company should implement standardized security strategies. They may include a requirement that customers regularly change their login credentials to enhance security.

Address and device verification

After a customer orders items, they should provide their billing address and zip code. The address details should match the card address details. If they don’t, an investigation should be required. It may include verification of the CCV number, IP address, and email. Device identification requires the use of technology to verify if it has been used for fraud purposes before.

Partner with a verified payment provider

It is safer to partner with a verified payment provider because they use secure shopping platforms that ensure customers are safe when making payments online. They give companies space to focus on business growth by handling all regulatory compliance requirements. Since the platforms handle millions of transactions daily, they ensure their payment systems are highly secure. This gives the provider a better brand reputation, and it attracts greater confidence from B2B customers.


Digital payment processing fraud is a serious challenge that cannot be ignored by any company. Losses from fraudulent transactions exceed $56 billion annually. As more online payment methods are developed, it creates more opportunities for fraudsters to take advantage. Businesses and their clients need to safeguard themselves against fraud using high-tech fraud detection and prevention methods.

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