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Understanding the Threat of Card Transaction Fraud

Updated: Nov 23, 2023

In recent years, card fraud has become a growing concern for financial institutions, banks, payment processing platforms, and e-commerce websites. Fraudulent credit and debit card transactions not only cause financial losses but also erode the trust that customers place in these institutions. With the growth of e-commerce, the threat of card fraud has increased significantly, and it is important for all of these institutions to understand the risks and take proactive measures to mitigate them.

Credit card fraud can take various forms, but the most common type is credit card transaction fraud, which involves an unauthorized transaction on a customer’s credit card. The perpetrators of such frauds are constantly finding new innovative ways to exploit vulnerabilities in the financial ecosystem, such as data breaches, phishing scams, and social engineering tactics. These fraudsters can steal credit card details, create fake accounts, and make unauthorized transactions, causing significant financial losses to both the financial institutions and the customers.

“Credit card fraud remains a major concern for businesses and individuals worldwide, with losses amounting to billions of dollars annually,” said Al Pascual, Senior Vice President and Research Director at Javelin Strategy & Research, an independent financial services research firm. “According to the 2021 Identity Fraud Study by Javelin Strategy & Research, credit card fraud losses increased to $4.2 billion in 2020, up from $3.5 billion in 2019.”

Globally, card fraud is making an even bigger impact on the world’s economy. According to FinancesOnline, fraud costs the global economy $5.127 trillion annually. Nearly half of all fraud cases involve accounts that are less than 24 hours old. Additionally, account takeover (ATO) attacks account for 29.8% of all fraud incidents on e-commerce websites.

There is also card-not-present (CNP) fraud, which is expected to increase from 57% in the US 2019 pre-pandemic to 74% by 2024, as depicted below from Insider Intelligence.

Fraud payment using a debit card is another growing threat that financial institutions and banks face. This type of card is tied to one of their customer’s bank accounts, and if a fraudulent transaction occurs, it can lead to direct losses to the customer’s funds.

Debit card fraud can take various forms, including skimming, phishing, and unauthorized transactions. Skimming occurs when a criminal attaches a device to a payment terminal that captures the debit card details when a customer swipes the card. Phishing is when a criminal attempts to trick the customer into giving away their debit card details by posing as a legitimate institution. Unauthorized debit card transactions can occur when a criminal uses the stolen debit card details to make purchases or withdrawals.

Hence, banks and other financial institutions are at a constant risk of losing money and credibility due to both credit and debit card fraud, while payment processing platforms and e-commerce websites can also struggle and suffer from possible reputational damage and loss of longtime loyal customers. These losses can often be severe, and it is not only the financial impact that matters. The reputational damage can last for years and can cause long-term damage to the institutions’ brand or even force a bankruptcy or closure.

“According to the 2021 Global Identity and Fraud Report by Experian, 72% of businesses across the globe reported an increase in fraud incidents in the past 12 months, with credit card fraud being the most common type of attack,”said Michael Bruemmer, Vice President at Experian Data Breach Resolution. “The report also revealed that fraud attempts on digital channels, including e-commerce and mobile, increased by 28% compared to the previous year.”

Additionally, according to Cybersecurity Ventures, global cybercrime costs as a whole are expected to continue to grow by 15% every year and reach $10.5 trillion annually by 2025 and spending on cybersecurity spending will surpass $1.75 trillion cumulatively starting in 2021 through 2025. The top 10 predictions published by Cybersecurity Ventures are listed below in a chart.

To tackle this growing global threat of card fraud, financial institutions, payment processing platforms, and e-commerce websites all need to adopt a multifaceted approach to prevent, detect, and respond to the fraud.

Use of machine learning (ML) and artificial intelligence (AI) can dramatically help to detect fraudulent transactions in real-time, while other techniques, such as biometric authentication and two-factor authentication, can help to prevent fraud from occurring in the first place.

Financial institutions also need to implement robust security measures to safeguard customer data and to build ongoing trust with their customers. Encryption, firewalls, and intrusion detection systems are some of the technologies that can be used and regularly updated to protect customer data and prevent data breaches. Additionally, financial institutions should frequently review their fraud prevention policies and processes to ensure that they are up-to-date and effective in a rapidly evolving threat landscape.


Credit card fraud is a significant threat to both businesses and consumers, leading to financial losses, reputational damage, and erosion of trust. A growing number of financial institutions are now changing course and embarking on a different, wholesale technology-enabled change of approach in response to the scale of challenges the financial industry is facing and how to best manage fraud detection and resolution in the future.

This is where FraudAway comes in. We are committed to providing innovative, cloud-native fraud monitoring solutions, which blends the power of ML/AI and rules based systems to reduce false positives and fraud losses while improving fraud detection rates. By leveraging the latest technologies and industry best practices, we are working to transform the way businesses manage fraud and protect their customers.

In closing, card transaction fraud can become a ticking time bomb of a threat and, what appears at the moment as, an uphill battle for financial institutions, payment processing platforms, and e-commerce websites alike to triumph. These enterprises are well aware of the increasing and crippling risks and are taking proactive measures to prevent and detect card fraud.

By adopting a multifaceted approach, one that includes machine learning, artificial intelligence, and a business rules engine with robust security measures, more and more businesses will finally be able to build an even stronger wall of protection and a stronger bond of trust with their customers while also protecting themselves from paralyzing financial losses and irreversible reputational damage.

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