A complete guide to payment fraud prevention

Payment Fraud

What is Payment Fraud?

Payment fraud is a subset of financial fraud that occurs when illegal transactions are made to deceitfully obtain money or servicesIt also encompasses the intentional use of false or stolen payment information to conduct transactions. For instance, fraudsters can use phishing emails to trick users into entering their Payment fraud is a subset of financial fraud that occurs when illegal transactions are made to deceitfully obtain money or services. sensitive financial data into a website, which leads to unauthorized digital transactions.

Here’s a quick breakdown of the characteristics of payment fraud:

  • It is an organized and orchestrated effort to steal payment information that leverages sophisticated tools and techniques.
  • It takes advantage of the loopholes present in the payment infrastructure, processes, and transaction methodologies.
  • It affects customers, banks, payment service providers, payment aggregators, and businesses.

This necessitates a dire need for robust Payment Fraud prevention strategies.

How does it manifest, and what are its implications?

Payment frauds are constantly evolving, and these emerging threats are sophisticated to discern. So, here’s a rundown on an array of tactics deployed by fraudsters to conduct illegal transactions.

payment fraud
  • Phishing: It is a fraud tactic that is used to gather sensitive data, such as login credentials, banking information, and other personal information. Nefarious fraudsters use phishing through emails and social media to create fake, identical login portals through which they intend to conduct unauthorized transactions.
  • Skimming: This is a form of fraud in which fraudsters use advanced technological devices known as skimmers to steal banking information at payment terminals. They’ll later use this information as counterfeit information to conduct unauthorized payments.
  • Identity theft: One of the most common ways payment frauds occur is through fraudsters pretending to be someone else to steal sensitive data like social security numbers and other personal banking details. Through identity theft, perpetrators intend to create financial loss or damage reputations.
  • Sim swapping: Sim swapping occurs when fraudsters trick mobile carriers into transferring a victim’s phone number into a sim card that they control. By intercepting messages, they gain access to banking details, through which accounts can be compromised and financial losses can be incurred.
  • Malware: Malicious Software designed to gain sensitive information is used by fraudsters to steal data. Malware is used to intercept digital payment transactions and create secret access to user systems, allowing fraudsters to manipulate transactions and steal funds discreetly.
  • Banking session hijacking: A banking session hijacking involves an attacker hijacking an active banking session to exploit banking information, such as to make unauthorized transactions, manipulate existing banking information, or steal banking credentials. This is by far the most common trend in payment frauds these days.
  • Social engineering: These types of scams involve hackers manipulating users to disclose their personal payment information, which leads them to voluntarily participate in compromising payment security. Fraudsters use a variety of tactics to perform social engineering that makes victims promptly comply and give in to their demands, often by instilling a sense of urgency or fear.
  • Business listing: Many fraudsters have resorted to scamming users by creating fake listings on directories to deceive customers. This may involve tricking customers into making payments through non-existent directory placements, misleading communications, and mimicking legitimate services.

Understanding the different ways in which payment frauds occur is crucial, but equally important is acknowledging the devastating consequences that follow. Let’s quickly delve into the detrimental implications of payment frauds.

The rise in digital payment frauds

The growing threat of digital payment frauds in the payment landscape is staggering. Globally, the number of frauds reported has risen dramatically, from 3,596 scams in FY2022 to 6,659 scams in FY2023. Domestically, the government’s cybercrime department’s data reveals a pernicious threat; over 61,100 complaints were recorded in 2022 only related to digital payment frauds. This underscores that the digital payment landscape is signaling a worrying trend and needs effective Fraud risk management strategies to sustain its increasing popularity and strengthen its safety and credibility.

How to protect financial operations from digital payment frauds?

Evading nefarious attacks in payment operations is not easy; it requires the implementation of robust security measures and vigilant monitoring. Here are key strategies to protect your operations:

  • Leverage advanced Fraud Detection/Prevention solutions for real-time payment fraud prevention that enriches risk assessment and minimizes operational disruptions.
  • Utilize intelligent monitoring tools to regularly monitor transactions and identify anomaly patterns to stay ahead of the evolving landscape of payment threats.
  • Elevate the security posture by integrating AI and ML-based algorithms that augment rule-based alerts to detect and prevent suspicious transactions promptly.
  • Follow strict regulatory adherence and industry best practices for fraud prevention to ensure a secure and resilient financial environment.
  • Educate customers about prevalent trends and warning signs to empower them with the necessary knowledge and tools to effectively identify and counteract fraudulent activities.
  • Report suspicious activity to FIU/Regulators to notify them about fraudulent activities and contribute to the enhancement of global financial security.

The role of detection and prevention in combating digital payment frauds

As the primary line of defense, detection, followed by prevention, plays a crucial role in combating digital payment frauds. From identifying potential threats to deploying prevention strategies, identification, and prevention go hand in hand. Let’s go over these essential functionalities to better understand their contribution:


To create a resilient security posture for your financial system, you need to inculcate robust fraud detection capabilities that can identify frauds adeptly. This can be achieved with an effective combination of technology, data analysis, and vigilant monitoring capabilities that facilitate real time fraud detection to spot unusual patterns that indicate fraud. An ideal detection solution should encompass real-time transaction monitoring to validate transactions, analytics, ML capabilities to analyze historic data and recognize suspicious activities, and an alert system to trigger notifications when unusual behaviors are detected.


As a proactive approach to preventing fraud from happening, we need to take essential steps that can fortify our defenses. Thus, financial entities should include some prevention strategies that help in the long run. By integrating payment fraud prevention solutions with strong authentication processes, secure communication channels, and fraud prevention tools, financial entities can ensure authorized transactions, prevent interception from fraudsters, and bolster security, minimizing the risks of payment frauds significantly.

How to choose the right payment fraud prevention solutions?

Now that we have understood the importance of payment fraud prevention, let’s quickly look at the roadmap to choosing the right solution:

The first step in choosing an appropriate Fraud risk management solution is to assess your needs. Based on the requirements, you can look for a solution that offers the following:

Layered defense: Today’s financial operations are extensive. To complement this, payment fraud prevention solutions should have multi-layered defense strategies that prevent varying degrees of fraudulent activities and fortify financial operations with its intricate protection layers.

Real-time capabilities: Financial institutions need real-time detection and response capabilities to detect and prevent sophisticated payment frauds. By employing a solution with real-time capabilities, you can effectively monitor transactions, identify unusual behavior, and assist in prevention efforts.

Analytics and visualization: Solutions that can process a large volume of data and interpret it into actionable insights are vital for payment fraud prevention endeavors. By visualizing these insights through intuitive graphs and charts, businesses can easily spot fraud trends, understand complex data, and make informed decisions.

Integration and scalability: Any digital payment fraud prevention solution’s integration capability and flexibility are of the utmost importance. Opt for a compatible solution that supports your operations and seamlessly scales according to your needs. By choosing a solution that can integrate with existing infrastructure, you can future-proof your systems, and it will remain effective as operations grow.

Related reading: Dive into BANKiQ’s latest blog to understand and navigate fraud risks in the digital payment ecosystem.

BANKiQ – Pioneering advanced fraud risk compliance solutions across payment channels

BANKiQ’s expertise in Fraud Risk Management accelerates your ability to detect and mitigate fraud effectively. As a comprehensive solution with risk coverage through Customer Onboarding, Login, Payments, and Fund Transfer, BANKiQ maps across the Fraud, Risk, and Compliance landscape to offer a single platform solution.

With the capabilities of end-to-end real-time Transaction Monitoring, Sanctions Screening, Onboarding Risk Scoring, and Suspicious Reporting, BANKiQ provides complete Fraud management for payment platforms. As the enabler of the best defense against new-generation financial crimes, BANKiQ is the trusted partner in securing digital transactions and ensuring compliance with evolving regulatory demands

The final word

Strong payment fraud prevention is no longer a luxury but an operational imperative that needs to be integrated into every level of financial transactions. With a surge in digital payment frauds, safeguarding transactions is more critical than ever. In line with this urgency, BANKiQ is facilitating comprehensive fraud management solutions that empower financial entities to detect, prevent, and respond to evolving financial crimes.

If you are interested in deploying BANKiQ’s solutions or learning more, contact us for a detailed consultation.