The face of e-commerce is changing as we know it. And the future of payment fraud is fraught with upcoming challenges for merchants.

We know that e-commerce merchants already face high rates of payment fraud. Globally, it is projected to cost e-commerce merchants upwards of $40 billion in losses by 2027.

Thinking ahead to the future of financial fraud paints an even scarier picture. As more individuals gain access to the internet, the rate of financial fraud will continue to climb. In fact, in 2020, US retailers faced a 7.3% year-over-year increase in fraud costs.

The changing face of payment fraud

​​This drastic growth in fraud can be attributed to two major factors:

  • The constant demand for a frictionless user experience. This drives merchants to adopt innovative checkout models like One Click purchase and Buy Now Pay Later (BNPL).
  • The ever-changing nature of fraud. Fraud has shifted from traditional imposters fraud to friendly fraud – where cardholders perform the majority of fraud.

These factors open a new window of opportunity for fraudsters looking to abuse systems that were previously established to protect merchants. Using these systems, fraudsters can claim illegitimate service failure or take advantage of someone else’s payment accounts.

We call this the expanded “attack surface” and it already is having serious impacts on the rate of BNPL fraud. Of course, this can also be expected to affect all other future checkout innovations.

This makes it even more important for merchants to think ahead and put in place fraud prevention strategies and solutions.

In order to prevent this futuristic payment fraud, merchants must understand their possible points of weakness. Then, they must take steps to protect themselves before fraudsters have the chance to strike.

Here we outline strategies merchants should employ to prevent fraudulent payment activity. As a result, merchants can expect to better protect their legitimate customers and their bottom line.

Strategies to prevent futuristic payment fraud

As fraudsters become more advanced, so should merchants’ strategies to protect themselves.

There are three distinct stages where merchants must track customer activity. This thereby installs extra layers of protection against both innovative and friendly fraudsters.

First, merchants must perform initial risk profiling when a customer creates their order. Merchants must track features of a transaction that might flag it as fraudulent. This is especially true of One Click purchases, where customers are purchasing without built-in identity checks.

For example, inconsistent geolocations might flag a fraudster performing an account takeover. Abnormal and accelerated account activity, on the other hand, can show a fraudster trying to buy as much as possible before they are caught.

Tracking these features will allow merchants to deny or investigate suspicious purchases.

Second, merchants must perform post-checkout and pre-shipment monitoring of their customers. This includes monitoring customer activity like email interactions or website visits.

It also might include tracking user or device information (like device fingerprinting or credit card scans). This way, merchants get to know their customers and their habits or behaviours. This can help merchants to identify which transactions are illegitimate.

Finally, merchants must be aware of fraudulent post-delivery chargeback claims. By gathering information about their customer at each previous step, merchants protect themselves from friendly fraud.

Armed with in-depth customer information, it is easier for merchants to refute any illegitimate chargeback claims that arise. This provides merchants with an extra layer of protection against friendly fraudsters.

The benefits of fraud prevention

Being prepared with fraud solutions can seriously reduce fraud attack expenses.

In fact, one study found that companies that had implemented fraud prevention programs were able to reduce their fraud attack response expenses by 42%.

There are many different software solutions that target fraudulent payment activity. But, in order to obtain full protection, merchants must carefully select one that offers protection across all layers of the expanded attack surface.

FUGU is the only multi-tier fraud prevention service that can offer comprehensive protection against futuristic payment fraud.

By monitoring customer behaviour across the entire attack surface, FUGU empowers merchants to combat payment fraud and fight back against friendly fraudsters.

Our service allows merchants to perform risk-scoring, prepare themselves for chargeback disputes, and automate verifications of customers all at the click of a button.


Idan Sharon | Fraud Fighter & VP of Sales

US: +1 650 614 1684 | IL: +972 50 244 5035
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