Payment Fraud
Unauthorized use of stolen credit-card details for purchases. Includes card testing (checking which stolen cards are active with small charges), account takeover, and triangulation fraud. Costs the merchant the goods plus a chargeback.
In practice
Payment fraud is stores' 'hidden enemy.' Card testing: a store suddenly sees 200 purchases of $1 — a hacker is checking which cards are active. Every 'purchase' incurs a processing fee. Then come the big purchases. Fraud detection is mandatory.
Common misconception
'A small store won't be targeted.' Hackers attack automatically — scripts scan unprotected stores. A small store with no protection is an easier target. Fraud happens even to $14K/month stores.
How to fix it
High fraud? (1) Enable a fraud-detection tool: Shopify has one built in, WooCommerce uses Kount / Signifyd, (2) Set rules: orders over $550 = manual review, (3) Require CVV + AVS, (4) Rate-limit checkout, (5) Add a CAPTCHA on the payment page.
Example
Gadget store: a card-testing attack — 340 transactions of $1-5 in one day. Loss: fees + hours of handling. Shopify fraud detection + rate limiting: zero suspicious transactions the following month. Adding a CAPTCHA: $0 + 1 hour.
Priority
Fraud prevention is day 1. Shopify: built-in fraud analysis — turn it on. WooCommerce: WooCommerce Anti-Fraud + Stripe Radar (built into Stripe). Not optional — without protection, you're a target.
Related terms
Keep learning. Metrics that touch the same area:
- ChargebackPaymentsA customer disputing a charge through their bank. Costs the merchant: a $7-15 fee plus the lost amount. Above 1% puts the account at risk.
- 3D SecurePaymentsAn additional security layer for card transactions — the customer verifies identity via an SMS code or biometrics. Reduces fraud by 80%+ and shifts liability from the merchant to the issuing bank.
- Payment GatewayPaymentsA service for accepting payments. Stripe, PayPal, Tranzila, Cardcom. Fee: 1.4-3.5% plus a fixed amount.
- PCI DSSPaymentsSecurity requirements for any business handling credit card data. Non-compliance means fines and account termination.
- BNPL – Buy Now Pay LaterPaymentsKlarna, PayPlus, Afterpay — interest-free installment payments. Raises AOV by 20-30% but carries a 2-6% fee.
- Refund PolicyPaymentsThe terms and process for refunding a customer. A generous policy raises conversions by 18% on average.
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