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Trending Fraud Problems in Payment Processing

In the name of protecting your business and your customers, learning about different types of fraud is essential. With so many emerging trends in the online marketplace, it can be difficult to keep up with what’s happening. Here, we’ll break down some of the trending types of fraud so you can be on the lookout for them.

Credit / Debit Card Fraud

This is by far one of the most prevalent types of fraud in ecommerce today. Credit and debit cards are the most widely used form of online payment, making them an easy target for criminals. Fraud is not limited to businesses partaking in high risk payment processing.  There are a variety of ways in which criminals can commit fraud with card payments through all types of businesses.


Chargebacks are also referred to as friendly fraud. These occur when a customer makes an online purchase (typically physical goods), and then asks their credit card issuing bank to stop the payment. In most cases, the customer receives the goods and then gets their money back, as well.

This is called friendly fraud because the customer does not get into a dispute with the merchant. They simply ask their bank to reject the payment. Unfortunately, the unsuspecting merchant often gets the short end of the stick because they lose the merchandise and the money in these types of fraudulent activities.


Another way in which criminals engage in credit card fraud is by stealing physical cards, or virtual card information. When this happens, they are able to make online purchases with the credit cards they stole and the merchant and cardholder are often unaware that it’s happening until it’s too late. If the thief has access to the credit card, driver’s license, etc., as might happen in the event of a stolen wallet, they can very easily make online purchases and get through security features such as AVS and other types of verification.

When card numbers are virtually stolen, thieves may engage in a variety of activities to use those cards. One such activity includes testing the card number by making a series of small purchases first to make sure it works. This is safer than making any major purchases because the small dollar amounts are more likely to go unnoticed by the cardholder.

Card Schemes

There are several different schemes that criminals use with credit and debit cards to gain access to the resources connected to those cards. One of these schemes is called “card spinning”. In this scenario, a software system will run algorithms at an extremely high rate of speed until it finds the correct expiration date or verification number that matches the card being used.

Refund Fraud

When a criminal commits refund fraud, they basically get any refunds that you process to go into their bank account, instead of the account of the customer who made the purchase. This can be done either by the criminal placing an order and then having the refund go to a different account, or by hacking into your system. If a criminal hacks into your system, they can process refunds and route them into their own bank account before pulling the cash out and shutting it down.

In a retail store, this takes on a slightly different look. If your business is brick-and-mortar, criminals can bring stolen merchandise into your store and request a refund. This is more common in big box stores than in small businesses, but it is still something to be aware of.

Identity Theft

Many people associate identity theft with credit cards, but it goes way beyond that. When a thief steals a person’s identity, they can gain access to credit card numbers, bank account information, social security numbers, and more. Once a thief has this information, they can make online purchases using a variety of alternative payment methods such as ACH and eChecks.

Identity thieves can also use the information they stole to open new credit card accounts in the victim’s name and use those cards to make illegal purchases. Not only that, but they can access your bank account and have the ability to drain any cash that you have available. They may also use your identity to file taxes, get medical services, and more.

Cryptocurrency Fraud

Given how elusive crypto can be, there are a variety of fraud types in this category. Some of them include serious crimes like money laundering and tax evasion, but for the purpose of this article, it makes sense to discuss a more common type of crypto fraud. For example, hacking and theft are much more common types of fraud that you may encounter as an online merchant.

This type of fraud is usually committed when the criminal steals the account information of the victim and uses their account to make online purchases. Some hackers are so savvy that they can actually steal an eWallet and drain its resources before the victim has any knowledge of the situation.


When a criminal intercepts a package being delivered to someone’s home or a credit card in the mail, it’s called an interception. This type of fraud is widespread and can come in different forms. For example, a criminal might use their victim’s credit card to make purchases online and have it delivered to their house to avoid being flagged for changing the address. However, they will intercept the package when it is delivered to the home.

Another type of interception happens with credit or debit cards. In this scenario, the criminal might call the card issuer to report the card lost or stolen and ask for a new one to be delivered. They will then get the card out of the victim’s mailbox before they realize anything is wrong.

Merchant Fraud

This type of fraud can be exceptionally scary for a merchant, especially if you have employees working for you. As an employer, you can be held responsible for the actions of your employees, even if you’re unaware of what’s happening. In the case of merchant fraud, your employees could be accessing your customers’ account information illegally and using it for their own purposes. As a merchant, it’s extremely important to have safeguards in place to protect your company, your consumers, and your employees from this sort of behavior.

Final Thoughts

The most important thing to remember when it comes to fraud is to stay vigilant. You can never be too cautious when it comes to protecting your customers’ information. More often than not, when something goes wrong, your customers and the courts will be more lenient with you if you took the proper precautions to protect your data. If you are found to be negligent in your efforts, the penalties will likely be far worse.