# What is Payment Fraud?

What is Payment Fraud? Unauthorized use of stolen credit-card details for purchases.

## How it works 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.

## Related metrics

- Chargeback — payment fraud results in a chargeback
- 3D Secure — protects against unauthorized fraud
- Fraud Score — a tool for detecting fraud
- CVV / AVS — basic checks to prevent fraud

## 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.

## Real-world 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.

## Where to start

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.

---

Category: Payments · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/payment-fraud