What is Payment Fraud?
Payment fraud refers to the illegal use of payment methods to steal money or sensitive information. It encompasses a wide range of tactics, including the use of stolen credit card data, fake identities, deceptive emails, and the manipulation of financial systems to illicitly gain funds.
The rapid pace of digital transformation has not only sped up the volume and ease of payments but also expanded the opportunities for fraudsters to exploit vulnerabilities. As digital services and online marketplaces continue to grow through online shopping, mobile wallets, and instant money transfers, this contributes to the potential entry points for fraud.
According to the 2025 AFP Payments Fraud and Control Survey, a staggering 79% of organizations experienced payment fraud attacks or attempts in 2024. In the e-commerce sector alone, losses from online payment fraud exceeded $44.3 billion globally in 2024. These figures are projected to escalate sharply, with anticipated losses surpassing $100 billion by 2029.
Types of Payment Fraud to Watch
Card Payment Fraud
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Credit Card Fraud
This occurs when criminals use stolen or cloned credit card information to make unauthorized purchases or cash withdrawals. Fraudsters often obtain card details through data breaches, skimming devices, or phishing attacks. Victims may not notice until fraudulent charges appear on their statements.
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Debit Card Fraud
Similar to credit card fraud, debit card fraud involves unauthorized transactions using a debit card linked directly to a bank account. Because these transactions withdraw funds immediately, victims can face instant financial loss, making early detection critical.
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Card Not Present (CNP) Fraud
CNP fraud happens when fraudsters use stolen card details to make purchases without physically presenting the card. This is common in online, phone, or mail-order transactions where merchants cannot verify the cardholder’s identity face-to-face, increasing the risk of fraud.
Bank Transfer Fraud
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Wire Transfer Fraud
In wire transfer fraud, scammers manipulate payment instructions or exploit weaknesses in approval processes to redirect large sums of money into accounts they control. This often involves impersonating trusted executives or vendors to authorize fraudulent payments.
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ACH (Automated Clearing House) Fraud
ACH fraud involves unauthorized initiation or alteration of electronic bank payments processed through the ACH network. Fraudsters may hack into systems or deceive employees to transfer funds illegally, often targeting payroll, vendor payments, or customer refunds.
Digital and Online Fraud
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Man-in-the-Middle (MitM) Attacks
MitM attacks occur when fraudsters secretly intercept communications between two parties during an online transaction. By capturing sensitive data such as login credentials or payment details, attackers can manipulate or steal information without either party knowing.
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Account Takeover (ATO)
ATO fraud happens when criminals gain unauthorized access to legitimate user accounts, often through credential theft or phishing. Once inside, they can initiate fraudulent payments, change account details, or siphon funds without detection.
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Mobile Payment Fraud
With the rise of mobile wallets and payment apps like Apple Pay, Google Pay, and Venmo, fraudsters exploit vulnerabilities in these platforms or use stolen credentials to make unauthorized transactions, often bypassing traditional card security measures.
Social Engineering Scams
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Phishing Attacks
Phishing involves sending fraudulent emails, texts, or setting up fake websites that impersonate trusted entities to trick victims into sharing payment credentials or personal information. These attacks often use urgency or fear to manipulate recipients.
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Vishing Attacks
Vishing is a voice-based scam where fraudsters make deceptive phone calls posing as bank officials, government agents, or company executives to extract sensitive information such as PINs, passwords, or payment details.
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Business Email Compromise (BEC)
BEC scams involve hackers gaining access to or spoofing business email accounts to impersonate executives or vendors. They then send fake payment requests or invoice changes to finance teams, resulting in fraudulent transfers that can amount to millions of dollars.
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Fake Invoices and Vendor Fraud
In this scheme, fraudsters send fabricated or altered invoices to companies, often mimicking legitimate vendors. If undetected, payments are made to criminal-controlled accounts instead of the rightful recipients.
Emerging Fraud Techniques
This sophisticated fraud method involves creating fake identities by combining real and fabricated personal data, such as Social Security numbers and birthdates. These synthetic identities are used to open fraudulent accounts or obtain credit, making detection difficult.
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Deepfake and AI-Driven Fraud
Leveraging advanced AI technologies, fraudsters create realistic fake audio or video clips that impersonate company executives or trusted individuals. These deepfakes can be used to manipulate employees into authorizing payments or revealing confidential information.
Payments fraud is the illegal or unauthorized use of payment instruments including credit and debit cards, checks, wire transfers, and online payment platforms to obtain financial gain. It encompasses a wide range of activities, from identity theft and account takeovers to fake refund claims and phishing scams. These fraudulent actions exploit vulnerabilities in payment systems and consumer behavior, often leaving businesses to bear the financial and reputational cost.
As digital services become the norm for trading, the scale and complexity of fraud have intensified. Fraudsters are now equipped with sophisticated tools, social engineering tactics, and global networks that allow them to bypass conventional security measures. Online marketplaces which serve as the platforms that connect buyers and sellers and facilitate millions of transactions daily, are particularly exposed to such risks.
Risks and Consequences of Payment Fraud
Payment fraud is more than just an inconvenience, it comes with serious risks:
Financial Loss
Fraud often leads to direct financial damage through unauthorized transactions, stolen funds, and chargebacks. Businesses may also face substantial costs related to fraud investigations, recovery efforts, and compensating affected customers.
Reputational Damage
Payment fraud can severely damage a brand’s reputation. When customers or business partners are affected, it can lead to public scrutiny, negative media coverage, and widespread skepticism about the company’s security posture. Rebuilding trust takes significant time and effort, and many affected users may never return.
Legal and Regulatory Liabilities
Non-compliance with data protection laws such as PCI-DSS, GDPR, and other international frameworks can expose organizations to heavy fines, legal action, and increased scrutiny from regulatory bodies.
Customer Churn
Trust is a critical currency in digital commerce and when it’s broken, it can lead to higher churn rates, negative reviews, and long-term revenue decline.
Which Industries Are Most at Risk of Payment Fraud?
Payment fraud poses a serious threat across many sectors, but some industries are more vulnerable due to the nature of their payment processes and data sensitivity. Understanding which industries face the highest risk can help businesses prioritize fraud prevention strategies.
E-commerce and B2B marketplaces
The e-commerce industry is a top target for payment fraud. With millions of online transactions daily, fraudsters exploit card-not-present (CNP) vulnerabilities, stolen payment data, and fake accounts to commit unauthorized purchases. In 2024, e-commerce payment fraud losses exceeded $44 billion globally, highlighting the sector’s high risk.
Financial Services
Banks, fintech companies, and payment processors are frequent targets of fraud due to their direct access to funds and sensitive customer data. Common attacks include phishing, account takeover (ATO), and sophisticated cyber intrusions aimed at bypassing security controls.
Telecommunications
Telecom providers face rising risks from SIM swap fraud, subscription fraud, and account takeovers. Fraudsters exploit telecom services to intercept two-factor authentication codes and gain unauthorized access to financial accounts.
Healthcare and Public Sector
Healthcare organizations and government agencies are increasingly targeted due to the high value of patient and payment data. Legacy payment systems and complex vendor networks make fraud detection challenging, exposing these sectors to billing fraud and data breaches.
How to Detect and Prevent Payment Fraud?
Proactively combating payment fraud is no longer optional, it is a competitive necessity. With attack methods becoming more sophisticated, businesses need agile, intelligent defenses that not only detect fraud in real-time but also anticipate it before it happens. Here are key strategies to minimize exposure and stay ahead of evolving threats.
AI-Driven Fraud Management System
Legacy rule-based systems can no longer keep up with today’s dynamic fraud landscape. Neural Technologies’ AI-powered fraud prevention platform leverages machine learning and predictive analytics to identify unusual behavior patterns, flag high-risk activities, and adjust to new fraud vectors as they emerge. By analyzing massive volumes of transaction data in real time, the system can detect fraud faster and with fewer false positives than traditional tools.
Predictive Analytics for Preemptive Defense
Fraud doesn’t always strike without warning. Our solution uses predictive analytics to detect early signs of fraud by analyzing abnormal payment behaviors, sudden changes in transaction velocity, and other subtle risk indicators that often precede fraudulent activity. This forward-looking approach helps your team detect and mitigate threats before any funds are lost, preventing fraud, not just reacting to it.
Monitor Transactions in Real-Time
Real-time transaction monitoring is vital for detecting and intercepting fraud as it occurs. Our solution continuously analyzes payments across all channels and applies adaptive risk scoring to each transaction. Suspicious activities are flagged instantly, enabling your team to respond before financial or reputational damage is done.
Regularly Audit Payment Processes
Payment fraud often hides in outdated workflows or unchecked operational gaps. Our solution streamlines the audit process by delivering real-time insights, automated compliance tracking, and full visibility across every payment activity, helping you identify and close loopholes before fraudsters exploit them.
Benefits of Neural Technologies AI-Driven Fraud Detection Solution
- Predictive Protection: Anticipate fraud before it strikes with advanced machine learning and behavioral analytics
- Real-Time Fraud Detection: Prevent fraud as it happens with broad protection across multiple fraud types
- Adaptive Intelligence: Self-learning models evolve with new fraud techniques.
- Frictionless Accuracy: Maintain seamless customer experience with high-accuracy detection and minimal false positives.
- Full Transparency: Unified dashboard for transaction monitoring, risk scoring, alerts, and reporting
- Regulatory Compliance and Data Protection: Streamline audits, ensure regulatory compliance and safeguard sensitive customer information
