5 Credit Card Fraud Protection Strategies for Businesses

Credit card fraud costs businesses billions annually and continues to accelerate as cybercriminals shift their tactics online. While chip-and-pin technology (EMV) has significantly reduced in-person fraud, card-not-present attacks have surged in response.

Today’s fraudsters don’t work alone—they deploy automated bots and AI agents to test thousands of stolen card details simultaneously, executing attacks at a scale and speed that manual security teams simply cannot match. For any e-commerce business, implementing robust credit card fraud detection isn’t just smart business—it’s essential for protecting revenue, maintaining customer trust, and staying ahead of increasingly sophisticated threats.

Key takeaways

• Credit card fraud costs businesses billions annually and destroys long-term customer trust.
• Cybercriminals now rely heavily on automated bots and AI agents to execute card-not-present and account takeover fraud at a massive scale.
• Unusual transaction patterns and rapid influxes of small orders are major warning signs of an active attack.
• Implementing multi-layer identity verification and strong multi-factor authentication creates necessary friction for malicious actors.
• Deploying real-time cyberfraud protection software analyzes intent to block bad bots in under 2ms without disrupting your legitimate customers.

What is credit card fraud detection?

Credit card fraud detection is the term used for the system or set of measures designed to identify and prevent credit card fraud. This can include verifying a customer’s identity at the time of purchase, blocking fake credit cards, requiring verification for high-value orders, and other measures we’ll discuss later in this article.

What impact does credit card fraud have on businesses?

Consumers are generally much better protected against credit card fraud than businesses are. When a consumer notices an unauthorized charge, they can usually get their money back through a chargeback. They can then cancel their credit card, order a new one, and the problem will mostly be solved. It’s a scary inconvenience, but nothing that will do irreparable damage.

Not so for businesses. The global cost of fraud losses incurred by payment card issuers and businesses has more than tripled since a decade ago—from $9.84 billion in 2011 to $35.8 billion in 2024. Losses are projected to increase to $43.47 billion by 2028.

Regardless of the size of your business, the financial losses associated with credit card fraud can be severe. You have to pay for the regular costs of making, processing, and shipping the fraudulent order, as well as the payment processor fees, on top of which then come the chargeback itself and chargeback fees.

That’s the direct cost of credit card fraud. The indirect cost comes in the form of reputation loss. It may not be your fault that someone gained access to a customer’s full credit card details (the fraudster could have bought that information on the dark web), but the customer will still remember your business when they recall their fraud experience. This will lead to a decline in loyalty and, ultimately, a decline in revenue.

Additionally, you can end up spending significant time and manpower detecting and responding to fraud—for example, by disputing and resolving chargebacks. This moves attention away from important business activities and will reduce the overall productivity of your business. 

4 types of credit card fraud that put businesses at risk

There are many types of e-commerce fraud, which is why it’s important for businesses to be aware of how fraudsters will try to obtain card information and make unauthorized purchases.  

1. Physical credit card fraud

Physical credit card fraud happens when someone steals a physical credit card and uses that to make unauthorized purchases or get cash. Someone can obtain a stolen credit card through simple wallet theft, mail theft, or by breaking into someone’s house or business.

Because of technologies such as EMV, physical credit card fraud is no longer as common as it used to be. Fraudsters work mostly online now, because it is much less risky in the sense that they can usually remain entirely anonymous. They’re not risking their identities and are very rarely caught.

2. Card-not-present fraud

Card-not-present (CNP) fraud happens when someone uses stolen or fake credit card information to make unauthorized purchases. The physical card is not present. Fraudsters usually obtain sensitive credit card details through phishing scams, data breaches, or by buying such information on the dark web.

And CNP fraud is on the rise, especially with the increasing use of digital wallets. In fact, digital wallets now make up 53% of global e-commerce spend.

3. Account takeover fraud

Account takeover (ATO) fraud happens when someone manages to break into a regular customer’s online account to make unauthorized purchases with the credit card (or gift card) attached to that account. Fraudsters usually gain access to customer accounts through credential stuffing or social engineering attacks. 

Once a fraudster manages to gain access to a customer’s account, it’s particularly hard to detect and stop them, because they are essentially operating entirely within business logic. The best way for a business to stop this type of credit card fraud is to prevent anyone from ever breaching a customer’s account in the first place.

4. New account fraud

Similar to ATO fraud, new account fraud uses a customer account to make unauthorized purchases. The difference is that the fraudster makes a new account instead of breaking into an old account. The fraudster uses stolen credit card details they obtained elsewhere to make purchases.

New account fraud is easier to stop than ATO fraud when you have the right identity verification processes in place during account creation. When you do, the fraudster will need to have access to both the victim’s identity documents and their credit card details to succeed in this type of credit card fraud.

Key signs of credit card fraud

While there are usually no dead giveaways for credit card fraud, there are some key triggers that you should look out for. Any of the below signs are worth investigating:

• Unusual transaction patterns: When a customer suddenly starts ordering goods differently from their usual transaction pattern. For example, when a customer who usually orders one good every few months suddenly orders a few dozen goods in the span of two minutes.
• Rush or special delivery orders: Fraudsters want their goods before you have the chance to stop their orders. That’s why they often prefer a rush delivery, so you have less chance to react in time. Be particularly careful with these orders. You need to find the right balance between a speedy delivery and fraud prevention.
• Orders from high-risk or unusual countries: Orders from countries where you don’t do business can be an indicator of credit card fraud too. Of course, it could be a privacy-conscious customer using a VPN, but it’s worth checking if it’s not a fraudster.
• Unusually large orders: You want to be extra careful when a customer wants to make an unusually large purchase, particularly if they’re ordering high-value items such as jewelry or technology. It may be a fraudster trying to push the order through; they only need to succeed once.
• Many small orders: On the other hand, a fraudster may try to stay below the radar and maximize their chances of success by making many small, seemingly insignificant orders. This, too, can be an indicator of credit card fraud.
• High chargeback rates: When you notice an uptick in chargebacks, chances are that you’re suffering from credit card fraud. At the very least, you want to stay below a 1% chargeback-to-transaction ratio, because card issuers like VISA and Mastercard apply penalties when you move above that threshold. 

5 tips for preventing credit card fraud

While you may never fully eliminate fraud from your business, it takes only a few steps to significantly reduce the chances of credit card fraud to the point where you no longer have to worry about it. 

1. Verify your customer’s identity

At the essence of credit card fraud lies a mismatch between the name on the credit card and the name of the person making the purchase. When you implement effective verification processes, you will protect both your customers and your business.

This can mean asking for identification during the account creation process, such as a valid ID, a passport, or a driver’s license. It can also mean verifying a cardholder’s information to make sure it matches, such as their name, address, or phone number.

2. Use fraud detection software

When it comes to detecting and preventing credit card fraud, it’s important to understand that fraudsters rely heavily on automation in most parts of the whole fraudulent process. They use bots to break into accounts, find stolen credit card information, order goods without authorization, et cetera. 

That’s why fraud detection software is one of the most effective ways to combat credit card fraud. This type of software will either block the bots that fraudsters use to target your websites and mobile apps, or analyze transaction data to identify patterns that are out of the ordinary. 

3. Require additional verification

If you or your fraud detection software notices any of the key triggers we mentioned previously, it’s a good idea to automatically ask for additional verification (particularly for high-value orders).

You can do this by asking for identification if someone’s trying to make a purchase without having logged into an account, or by verifying their billing and shipping address to ensure they match against the information on the credit card. You could also contact the customer to ask if they want to continue with the order—but make sure the fraudster hasn’t changed contact details.

4. Monitor for data breaches

When you hold a large amount of sensitive customer data, you should always monitor for data breaches, just in case. When a data breach occurs and fraudsters gain access to credit card details, you can expect a quick and significant uptick in credit card fraud.

When you suffer a data breach, you have to notify customers immediately and strongly encourage them to change their passwords to reduce the immediate risk of credit card fraud. It’s also quite likely you’ll need to inform authorities and other relevant organizations as per the data privacy framework that regulates data security and privacy in your region.

5. Encourage multi-factor authentication

Strong passwords and multi-factor authentication (MFA) are great ways to make fraud more difficult for attackers. Fraudsters almost never have access to both someone’s credit card details and their phone, meaning MFA often stops fraudsters dead in their tracks. Although forcing customers to use MFA can cause friction, encouraging them to set up MFA, create strong passwords, and rotate their passwords every few months can greatly strengthen account security.

Why do you need fraud prevention software to prevent card fraud?

Fraud prevention software is an essential tool for combating card fraud, and indeed many other types of fraud. Because fraudsters use bots to automate most of their attacks, the best fraud prevention software programs are those that detect and block malicious bots before they can reach your websites or mobile apps.

Ideally, the software does this in real-time, without impacting the customer’s experience, and against both known and unknown bot threats. The software shouldn’t be difficult to install, should fit neatly into your existing tech architecture, and should not require any maintenance from your IT team. The right fraud prevention software can be one of the most effective fraud prevention methods for e-commerce businesses.

Detect and prevent credit card fraud with DataDome

DataDome is fraud prevention software that stops malicious bots from attacking your websites, mobile apps, and APIs. It helps prevent credit card fraud, but also other types of automated online threats, such as card cracking, scraping, and DDoS attacks.

DataDome’s multi-layered AI-powered detection engine stops malicious bots and AI agents at the edge within 2ms, before they can commit fraud. Additionally, your team has full visibility and control over which bots you’d like to allow through. DataDome is lightweight, easy to install, and doesn’t require any maintenance from your IT team.

When a leading payment processor was dealing with an influx of credit card coming in from its public-facing forms, the payment processor turned to DataDome to stop the fraudulent attacks. When deciding on a provider, ensuring they found a solution that would identify and stop bots before fraud attempts turned to transactions was a top priority. With DataDome, the fraud was entirely eliminated:

Curious to learn more? Book a demo to see how DataDome can help your business detect and prevent credit card fraud.