Modern businesses must balance fast, seamless payments with proactive fraud prevention. With digital payment fraud projected to exceed $50 billion globally by 2025, the threat is a defining challenge for online commerce. In the race for frictionless checkout, some merchants have even removed CVV checks, unintentionally weakening their defenses. The good news is that convenience doesn’t have to come at the cost of security.
While credit cards remain the dominant online payment method, preferences — and risks — vary widely. From bank transfers in Europe to digital wallets across APAC, each carries a unique fraud profile.
This article breaks down which online payment methods pose the highest fraud risk — and what makes each more vulnerable than others.
Why Fraud Risk Varies Across Payment Methods
Each payment method exposes businesses to fraud in different ways. Factors such as how users are verified, how funds move, and what protections exist for chargebacks or reversals all shape the level of risk. Credit cards, for example, invite chargeback abuse, while digital wallets often face account takeover attempts. In contrast, direct bank debits or crypto payments may lack recourse once a transaction is completed.
Recognizing these distinctions is key to designing effective defenses — and to understanding which methods deserve the most attention in your fraud strategy.
Understanding Fraud Exposure by Payment Method
Cards
Credit and debit cards are the cornerstone of online transactions, favored for their ease and speed. However, their widespread use makes them a top target for fraudsters.
- Fraud risks: Stolen card details, card-not-present (CNP) fraud and friendly fraud through chargebacks are persistent issues. Fraudsters often test stolen credentials with small purchases before scaling up.
- Consequences: Excessive chargebacks can result in financial penalties, increased processing fees, or even blacklisting by card networks, which can severely impact a business’s viability.
Gift Cards, Loyalty & Reward Points
These systems are designed to boost engagement, but their lower security thresholds often invite gift card fraud and other forms of abuse.
- Fraud risks: Fraudsters exploit weak verification processes to hijack accounts, duplicate cards or redeem unauthorized rewards.
- Consequences: Businesses risk financial losses from illegitimate redemptions and damage to brand trust. In some cases, regulatory consequences may follow, especially where customer data is compromised.
Digital Wallets
Digital wallets like Apple Pay, Google Pay and PayPal provide fast, frictionless payments, but they are also increasingly attracting fraud attempts.
- Fraud risks: Account takeovers and chargeback abuse are frequent, particularly when login credentials are stolen through phishing or credential stuffing.
- Consequences: Customer frustration, brand erosion and even merchant account freezes can result if fraud isn’t managed effectively. Wallet-based chargebacks are often difficult to dispute, especially on platforms that favor the buyer.
Bank Debits
Used for recurring billing or direct purchases, bank debits (pull payments) can be efficient, but they offer limited recourse when fraud occurs.
- Fraud risks: Stolen bank credentials allow unauthorized debits, and without a chargeback mechanism, the loss is often final.
- Consequences: Reputational damage and ethical concerns can arise if victims are left unsupported. Businesses must often absorb the loss or face the backlash of customer dissatisfaction.
Authenticated Bank Debits
Region-specific systems such as ACH (US), Bacs (UK), Bancontact (Belgium), and BECS (Australia) introduce additional safeguards, but they’re not immune to exploitation.
- Fraud risks: Credential theft and social engineering remain threats, particularly when authentication processes vary across platforms.
- Consequences: These methods may delay detection or resolution of fraudulent activity, particularly in systems with longer clearing times, creating frustration for both businesses and end-users.
Buy Now, Pay Later (BNPL)
BNPL offerings have rapidly expanded, offering consumers flexible payment terms. However, their structure opens the door to abuse.
- Fraud risks: Synthetic identities and stolen credentials are frequently used to open BNPL accounts. Because onboarding is often faster and less rigorous, it becomes a favored method for opportunistic fraud.
- Consequences: While providers often absorb direct losses, merchants may still face higher costs, increased risk exposure and reputational concerns, especially if fraud appears linked to lax safeguards.
Cryptocurrency
Cryptocurrencies offer speed, cost efficiency, and no chargebacks, but they also attract crypto fraud due to their semi-anonymous nature.
- Fraud risks: Scams, wallet theft and unauthorized transactions are common, particularly in environments lacking robust identity verification.
- Consequences: Businesses may be vulnerable to regulatory scrutiny, including anti-money laundering (AML) violations, if malicious actors exploit crypto channels under their watch.
How Businesses Can Assess Fraud Risk Across Payment Methods
Absolute protection against payment fraud may be out of reach, but a smarter, more nuanced approach to risk assessment is well within grasp. As online payment ecosystems diversify, businesses must evaluate the fraud exposure tied to each method they support, from cards and bank debits to digital wallets, BNPL and crypto.
Understanding fraud risk isn’t just about identifying common tactics like chargebacks or account takeovers. It involves mapping vulnerabilities across the full transaction journey — from onboarding to checkout — and aligning fraud controls with the risk profiles of each payment method.
To do this effectively, businesses need visibility, adaptability and speed. Real-time data signals, behavioral insights and contextual device intelligence can help uncover fraud attempts before they materialize. A layered risk strategy not only helps reduce losses but also preserves the seamless experience today’s customers expect.
For businesses seeking to manage fraud across a complex payment landscape, SEON provides a comprehensive solution with advanced tools to monitor onboarding, transactions, payouts and beyond, backed by AI-powered risk scoring and over 900 first-party, real-time signals to equip you with the intelligence to minimize friction while staying ahead of evolving threats.
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Browser Fingerprinting | Device Fingerprinting | Fraud Detection API | Fraud Detection with Machine Learning & AI
Sources
1. TechWithTech – Online Stores Don’t Require CVV
2. Global Payments – Commerce Payment Trends
