5 Payment Fraud Prevention Tips for Businesses


Connexpay Blog Imagery

Online fraud happens when criminals maliciously obtain payment details and use them to make unauthorized purchases or transactions. We explore the key types of online payment fraud and share our top payment fraud prevention tips to help protect your business.

Understanding payment fraud

Payment fraud has rapidly evolved from simple email scams to complex criminal activities targeting vulnerable and unsuspecting users. According to stats published by Statista, e-commerce losses to online payment fraud were estimated at $41 billion in 2022. The figure is expected to grow to $48 billion by 2023.

It’s not just the financial losses that businesses need to worry about. Payment fraud can lead to increased operational costs, reduced customer trust, and serious brand reputation damage.

What are the different types of online payment fraud?

Effective payment fraud prevention requires a good understanding of the different types of fraud that threaten your business and customers and tactics used by cybercriminals. These include:

  • Identity theft – A cybercriminal steals personal or financial information from someone and uses it to commit fraud, such as making unauthorized purchases or financial transactions.
  • Credit card fraud – This is a catch-all term for fraud or theft involving a credit card (or another type of payment card). Typically where online fraud is concerned, goods or services are purchased from a website using a stolen card or hacked card details.
  • Phishing – Phishing is the fraudulent act of sending emails or messages pretending to be from a reputable company. These messages attempt to convince individuals to reveal personal information, such as credit card numbers or passwords, which can be used to access accounts and commit fraud. 
  • Account takeover – Account takeover occurs when a hacker gains unauthorized access to an online account. They may try to hold the account hostage, demanding payment from the user, or they may try to generate fraudulent transactions.

How does online payment fraud impact businesses?

Online payment fraud can cause significant disruption to an individual’s life, damaging their credit, finances, and reputation. But its impact doesn’t end there. It can also have several negative consequences for the business on the receiving end, including:

  • Expensive chargeback fees 

  • Loss of inventory

  • Increased operational costs 

  • Increased friction at the checkout 

  • Damage to brand reputation 

How to protect your business against payment fraud

It has never been more important to recognize and prevent payment fraud. Learn the measures you can take to protect your business against online fraudsters. Below, we’ve outlined our top payment fraud prevention tips to consider and implement.

1. Use secure online payment technology

The technology you use to sell online can act as a first and last line of defense against payment fraud. For example, using a reputable third-party payment gateway to accept, process, and send payments increases security for your business and its customers. 

That’s because any data transferred through a payment gateway is encrypted, meaning it can’t be accessed by anyone other than the business or the customer. This makes it far more secure than manual payment processing and also sidesteps the need to store sensitive customer information on your company’s servers, further reducing the risk of hacking. 

Read more: 5 Payment Gateway Features & Functionality Must-Haves

2. Ensure PCI DSS compliance

When you accept credit card payments, you must comply with the Payment Card Industry Data Security Standards (PCI DSS).

This set of guidelines is designed to improve your payment security environment and reduce the risk of credit card fraud. 

To comply with the PCI DSS, you must do the following:

  • Build and maintain a secure network

  • Regularly monitor and test networks to spot intrusions or frailties

  • Protect cardholder data

  • Scan for and protect against malware and viruses

  • Control access to sensitive data 

Undertaking those tasks and adhering to industry standards can help you minimize data breaches, secure customer data, and lower the chances of fraud.

Note: Although not a legal requirement, failure to comply with the PCI DSS could result in fines or your business bank account being terminated.

3. Educate employees on scams and cybersecurity best practices

A lot of fraudulent activity happens due to social engineering (where criminals manipulate people into providing sensitive data or account credentials). Ensure your employees are trained to spot common phishing techniques and social engineering scams – it’s vital for effective payment fraud prevention. 

It’s also a good idea to train staff to spot and stop fraud as it’s happening. Encourage them to trust their gut when faced with a suspicious request or unusual transaction. When this happens, they should contact the customer linked to the credit card via a trusted phone number or email address and confirm the request’s legitimacy.

Implementing cybersecurity best practices adds another layer of protection. Things to consider include: 

  • Using two-factor authentication for all company accounts to protect them from account takeover attacks

  • Applying strong passwords and prohibiting password sharing

  • Ensuring all employees use company email addresses to communicate with one another, vendors and customers; using free email addresses, like Gmail, can make it easier for fraudsters to impersonate your business

4. Regularly monitor and analyze transactions

Regularly reviewing online transactions can help you spot common online payment fraud trends. Here are some red flags you should be aware of:

  • Repeat customers placing large or unusual orders could hint that their account or payment details have been compromised

  • New customers placing several small orders back-to-back or buying the same product multiple times

  • Shipping and billing addresses don’t match

  • Suspicious contact information, such as spammy-looking email addresses

  • Poorly written or scripted messages 

Of course, if you’re dealing with hundreds or thousands of transactions a day, manually reviewing every one of them can be challenging. With this in mind, we recommend implementing a fraud detection system and using artificial intelligence (AI) to analyze large datasets. This helps you identify fraudulent patterns or activities in real-time, alerting you to the need for a manual review and further investigation. 

5. Partner with payment solutions providers (PSPs)

Our fifth and final payment fraud prevention tip is to partner with a payment solutions provider (PSP).

PSPs help your business accept credit and debit card payments, ensuring you can collect and manage payments efficiently, all in one place. 

But the benefits of working with a PSP like ConnexPay extend beyond accepting and managing payments. You’ll also have the advantage of enhanced security features, payment fraud prevention expertise, streamlined operations, and reduced financial liability. 

Below are the ways ConnexPay can help you prevent and tackle payment fraud.

Secure transaction processing

Our payment platform is streamlined and secure, exceeding the requirements of the PCI Standard. Enjoy complete confidence in every payment made and received via ConnexPay.

Fraud monitoring and risk management built-in

We partner with a best-in-class payment fraud prevention solution from Kount, an Equifax company. With Kount’s technology integrated into ConnexPay at no additional charge, every transaction is scored by Kount’s AI for fraud insights and machine learning technology before being cleared for processing.

Built to recognize patterns, anomalies, and linked associations, as well as learn from historical outcomes, Kount detects complex and common fraud in milliseconds.

Learn more in our video featuring Kount: How to Increase Revenue by Reducing Fraud and Chargebacks.

Chargeback prevention and management

Our Chargeback Management System is a proprietary product developed with simplicity in mind and customer feedback. The user-friendly interface provides a clear view of the original transaction history and all supporting chargeback documentation and ties to the virtual card history to show a holistic view of the payment life cycle to manage chargebacks efficiently.


Online payment fraud poses a significant threat to your business’s reputation and bottom line. If you don’t take steps to safeguard customer data, secure payment processing, and educate your staff on the signs of cybercrime, you could face serious consequences.

The good news is that working with ConnexPay to accept and issue payments can help you monitor every transaction in real-time and enhance payment fraud prevention. Our built-in fraud detection will alert you to potentially fraudulent activity and help reduce chargeback and fraud risk at no extra cost.

Download our Checklist: What to Look for When Choosing a Payment Gateway Solution

Key considerations to keep top of mind

Download Now