The Most Common Types of Payment Fraud and How to Detect Them

Payment Fraud

Payment fraud has become an increasingly prevalent problem in today’s digital age. With the rise of online transactions and mobile payments, fraudsters have found new ways to exploit vulnerabilities and defraud unsuspecting victims. From identity theft to credit card fraud, payment fraud takes many forms and can have devastating consequences for individuals and businesses alike. However, by understanding the ways for payment fraud detection, you can take proactive steps to protect yourself and your finances. In this blog, we’ll explore the most common types of payment fraud and provide tips on how to detect and prevent them.

1. Phishing Scams

Phishing is a technique of social engineering in which the target is duped into disclosing sensitive information (such as financial data). Phishing scams can take many forms, including fake emails, text messages, or phone calls that appear to be from a legitimate company or financial institution. These messages may ask the recipient to click on a link, enter their personal information, or provide login credentials to a fake website.

To avoid falling victim to a phishing scam, it’s important to be vigilant and double-check the legitimacy of any messages that ask for personal information. Always be wary of unsolicited messages, and never click on links or download attachments from unknown senders. If you receive a suspicious message, contact the company or financial institution directly to verify the message’s authenticity.

2. Card Skimming

Card Skimming

Card skimming is a type of payment fraud where criminals use a small electronic device to steal credit or debit card information. This device, known as a skimmer, is placed on a card reader, such as an ATM or gas pump. 

When a card is swiped or inserted into the reader, the skimmer reads the information on the magnetic stripe or chip, which the criminal can then use to make unauthorized purchases. 

The Nilson Report, which tracks the payments sector, predicted in December 2022 that card fraud would cost the United States $165.1 billion over the next decade, affecting people of all ages.

Detecting card skimming can be difficult, but there are some signs to look out for. If a card reader looks different or unusual, such as an ATM with a bulky attachment, it may have a skimmer installed.

If the reader is loose or wobbles, it could be a sign that a skimmer has been installed. It’s also a good idea to check your bank statements regularly for any unauthorized transactions.

3. Account Takeover

Account Takeover

Criminals committing account takeover use the victim’s bank or credit card information to make purchases without their knowledge or consent. Criminals can gain access to accounts through a variety of means, such as stealing login information through a phishing scam or using malware to gain access to a person’s device.

To detect account takeover, it’s important to monitor accounts regularly for any unusual activity, such as purchases or withdrawals that you did not make. If you suspect that your account has been compromised, contact your financial institution immediately to report the issue and take steps to secure your account.

4. Malware and Ransomware Attacks

Malware and ransomware attacks involve the use of malicious software to obtain personal information or hold it for ransom. Malware can infect a victim’s computer or mobile device through a variety of methods, including email attachments, phishing scams, or infected websites. Once the malware is installed, it can collect personal information or encrypt files and demand a ransom for their release.

To protect against malware and ransomware attacks, it’s important to use antivirus software and keep all software and operating systems up to date. Additionally, be cautious of unsolicited emails or messages, and avoid clicking on links or downloading attachments from unknown senders.

4. Friendly Fraud

Friendly fraud is a type of payment fraud where a person makes a legitimate purchase but then disputes the charge with their credit card company, claiming that they did not make the purchase or that the purchase was not as described. This can be done intentionally or unintentionally, such as when a family member makes a purchase on a shared account and forgets to tell the account owner.

Receipts and order confirmations should be kept for a period of time in order to discover friendly fraud. If a dispute arises, you can use these records to prove that the purchase was legitimate. It’s also a good idea to have clear policies in place for refunds and returns to prevent disputes from occurring in the first place.

5. Fake Check Scams

Fraudsters committing “fake check” schemes send fake checks to their targets, who are then asked to transfer back a portion of the funds after depositing the check. The check may appear to be from a legitimate source, such as a lottery or a job offer, but it is actually fake.

Be suspicious of unexpected offers that sound too good to be true in order to spot potential fake check scams. Never deposit a check from someone you do not know or trust, and always verify the legitimacy of the offer before taking any action.


Remember to monitor your account activity regularly, use strong passwords and two-factor authentication, and report any suspected fraud immediately to your financial institution or law enforcement. With the right knowledge and tools, you can help safeguard yourself against the most common types of payment fraud and enjoy the benefits of safe and secure transactions.

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