Payment Fraud Trends in 2024: What Businesses Need to Know

2024 was an interesting year for payment fraud. In Q1, unauthorized payment fraud increased by 5%, with 1.5 million cases recorded. One in three Americans was scammed in 2024. And fraud rates reached an all-time high, accounting for $485.6 billion in 2023. Need we say more?

Well, we will because there is more that businesses should know about payment fraud trends in 2024.

Read on to find out more.

Fraud Becoming More Frequent and Sophisticated

In 2024, frauds are getting more frequent and there is an evident increase in the sophistication of the attacks.

Based on industry insights, around 59% of merchants acknowledged an increase in payment fraud cases in the last year. FaaS, or Fraud-as-a-Service, is gaining traction. It involves criminals selling tools and services, making fraud more advanced and sophisticated.

Advanced generative AI has acted in two ways. It assists businesses with anti-fraud solutions, but criminals use it on a larger scale for attacks. For example, tools now known as ‘AI-native’ are used in phishing schemes to produce images of emails that look like they were composed by experienced professionals.

To handle threats, companies are now looking to adopt machine learning algorithms capable of sifting through large data sets and detecting anomalies within a very short period to prevent payment fraud.

The Growing Financial Impact of Payment Fraud

The loss connected with payment fraud continues to be massive, both in immediate cost and future losses to reputation.

By 2028, merchant fraud losses are likely to hit a whopping $91 billion across the world. That, therefore, puts mid-level businesses in a very risky position, with some noting average losses of as high as 4.1% of their annual earnings from eCommerce.

In 2024, one significant observation is the shift towards chargeback fraud, where customers unsuccessfully argue to get their money back for transactions they legitimately carried out. Companies seem to incur the costs of this approach, whether it takes advantage of poorly stated terms of return or unclearly phrased names for received payments.

To prevent this, companies prefer using 3D Secure authentication to reinforce the level of security on any transaction and automatic credit card chargeback.

Increasing Variety of Fraud Tactics

It is getting easier for fraudsters to operate as their methods increase in number and complexity.

The expectation in 2023, according to Morita, was that, on average, a merchant would face three types of payment fraud. By the end of 2024, NA stated that this figure would only increase. These include:

• The use of multiple fraudulent identities created using real and made-up details.
• A scenario where hackers access and take over user accounts obtained through phishing or malware.
• Contactless fraud that uses near-field technology. Something growing in adoption across mobile payments.

Looking into account takeovers, people see fraudsters utilizing social engineering to persuade users to provide some login details. They then make unauthorized purchases from within the accounts or steal the points. As we speak, synthetic identity fraud has become a massive issue in the unsecured lending industry, where it is tricky to ascertain illegal identities.

Leveraging Real-Time Risk Assessment

As expected, the most common trend in 2024 will be the attempt to prevent advanced persistent threats.

The traditional paradigm of passive fraud monitoring has been rendered obsolete due to recent changes. Organizations are now leveraging advanced analytics, AI, and machine learning-style risk models applied in real time.

These platforms constantly review transactions based on daily activities to identify possible risks and they are working well. For example, AI-fueled fraud prevention systems might refuse to execute an unusual transaction if the originating IP is from a dangerous country.

AI is also boosting the adoption of fraud orchestration tools, which allow businesses to consolidate information from various sources to create a unified risk assessment of a single transaction. That improves anti-fraud measures and curtails clients’ losses caused by erroneous acceptance of transactions.

Preparing for the Future of Payment Fraud

Fraud is increasingly omnipresent, meaning prevention should now be the primary focus for firms. Below are some effective risk aversion measures organizations can consider:

• Embrace AI and ML models
• Employees are essential, as are customers – train your employees well!
• Engage with PSPs
• Upgrade the data security strategies.

The payment fraud landscape in 2024 is marked by increasing frequency, financial impact, and diversity of attack methods. Still, businesses are not powerless. If they’re staying informed about emerging fraud trends and implementing robust, companies can protect their revenue and reputation. The fight against fraud is an ongoing challenge, but with the right tools and strategies, businesses can stay one step ahead of cybercriminals.

James Ewen

James is the head of marketing at Tamoco