Payment fraud prevention, protection, and detection - all you need to know

Evgen Mekheda

Dec 8, 2025 — 7 min read

Thousands of fraud prevention specialists are working long hours to stop financial crime, while fraudsters are putting in just as much or even more work into coming up with new strategies, upgrading hacking tools, and implementing new uses of AI to trick defences. Protecting a business from payment fraud is getting more complicated every day, especially in high-growth verticals like esports, sports, and NIL compensation.

Four out of five organizations are victims of payment fraud with attacks coming from both outside and inside the organization. External payment fraud, internal misuse, vendor manipulation, corporate theft, and other types of financial crime aren’t separate, unrelated problems anymore. These issues combine into a single, urgent risk that can bleed a business dry or paralyze payment operations.

Protecting a business requires a unified fraud prevention strategy and intuitive controls on all levels, not a manual review of suspicious transactions many businesses still default to. This includes monitoring transactions, maintaining role-based access, auditing logs, flagging unusual activity, multi-factor authentication, and ongoing oversight across internal workflows and vendor relationships.

Types of payment fraud

Payment fraud is a large umbrella term that harbors all types of unauthorized and illegal attempts to manipulate a payment system. By source, fraud can come from inside or outside of the organization.

Internal fraud - corporate fraud committed by people within the organization who exploit their position to manipulate finances and steal assets. The higher the position, the greater the potential impact of internal fraud. You may be thinking your staff is beyond suspicion, but payment fraud follows the 10/80/10 rule, which helps understand human behavior: 10% of people will never commit fraud, 10% are actively looking to commit fraud, and 80% could go either way.
External fraud - actors from outside the organization such as fake suppliers, cybercriminals, impersonators, and others who exploit employee trust and technological vulnerabilities.

According to PwC, these dangers break down around these lines:

External perpetrator 43%
Internal perpetrator 31%
Collusion between internal and external actors 26%.

Most common corporate payment fraud schemes

Asset misappropriation - employees can steal or misuse company funds or inventory for their personal gain. As a business, you have to enforce role-based access, regular audits, and track inventory to prevent misappropriation.
Financial statement fraud - without meaningful controls, staff can alter accounting records to misrepresent performance and achieve promotions or bonuses. Automated internal controls, a detailed audit trail for all actions, and independent reviews are key tools to prevent it.
Bribery and corruption - the larger the organization, the higher the chances of corruption. Accepting money, gifts, or favors to influence company decisions can be prevented by a merit-based vendor approval process and whistleblower protections.
Payroll fraud - claiming fake hours, paying ghost employees, and awarding unauthorized bonuses can be prevented with dual approvals and transparent payment management.
Expense reimbursement fraud - false or inflated expense reports bloat reimbursements. This can be prevented by intelligent claim review and expense tracking automation.

Most common external payment fraud schemes

Wire fraud - whether via email or other means, criminals impersonate a vendor, executive, or an employee to falsify wire instructions and redirect payments to their own accounts. Prevent wire fraud by training staff, implementing strong payment verification, account confirmation, and internal payment approval procedures.
Business email compromise (BEC) - fraudsters use a variety of methods to impersonate a vendor or an executive to trick employees into making payments. Similar to phishing, BEC exploits human trust, so it can be prevented by training vigilance and ensuring common sense cyber security and authentication protocols are followed.
Account takeover - fraudsters get access to a customer account and initiate transactions. Multi-factor authentication and unusual activity controls help detect and prevent these attempts before the account control is lost.
BIN attacks - fraudsters use bots to generate card numbers and find valid payment credentials. Bot detection solutions and velocity limits block rapid transactions from the same IP and help prevent these attacks.
Card testing/triangulation - criminals use fake storefronts to collect payment details and make illegal transactions.
Authorized push payments - victims are convinced to send money to fraudsters. With advances in GenAI for voice cloning and deepfakes, it gets easier for criminals to impersonate employees and put consumers at risk.
Phishing - a social-engineering attack where fraudsters use emails, texts, or websites to trick customers or staff into disclosing their sensitive data. It’s important to train your staff and clients to be cautious when opening attachments and links and to double-check that they are dealing with your official service.
Skimming - fraudsters use a device (skimmer) to steal credit or debit card information at ATMs or POS terminals. The skimmer captures card data to make fraudulent purchases. It’s important to make sure staff and clients are trained to pay attention to the devices they interact with.
Identity theft - a fraudster steals sensitive information to open accounts or make purchases. This term covers many fraud techniques that have to do with using personal information to open credit cards, apply for loans, or make other illegal deals. Business has to prevent identity theft with a strictly managed access to customer data, strong identity verification procedures, and payment fraud protection controls.
Gift card fraud - once fraudsters gain access to a customer’s account, they purchase gift cards, which are hard to trace and can easily be converted to cash.
Chargeback - this type of fraud includes a customer disputing a legitimate transaction. In many cases, they will be refunded by their financial institution, and keep the product or service they received. It is the responsibility of a business to maintain records, verify the identity of the customer, and formulate the refund and return policy that covers chargeback disputes. It is impossible to control chargebacks fully, but you can minimize them by keeping policy abusers accountable.

Payment fraud prevention

According to the Association of Certified Fraud Examiners (ACFE), organizations lose an average of 5% of their annual revenue to fraud. That’s a huge expense, much larger than the cost of plugging the fraud hole. The first step in minimizing fraud is making sure your digital payment operations are run and used safely.

Employee training - teach staff to recognize suspicious actions, promote whistleblowing by providing secure channels, and implement an internal red-flag system.
Customer education - help customers build safe login habits, awareness, and understanding of the importance of your security measures.
Authentication controls - enforce multi-factor authentication for significant actions like logins, account changes, new devices, and payouts.

Payment Labs allows you to enforce multi-factor authentication, assign role-based user permissions, onboard customers securely, and maintain clear approval workflows. The controls within the system let you limit who can access, modify, and move funds, protecting you even if one of your employees is compromised.

Payment fraud protection

You can’t exist in a fraud-free environment, but you can prevent most payment fraud before it becomes a financial problem. While you don’t want to slow the transactions down, it’s worth it to deal with a false positive once in a while to prevent fraud. Here are some of the techniques that prove effective in protecting a business from modern payment fraud approaches.

Device fingerprinting - flag logins from unfamiliar devices and regions and require additional verification or internal confirmation for unexpected usage patterns.
Role-based access - assign roles and access levels to users in order to limit who can initiate, approve, and release payments, so transactions don’t fully depend on a single employee.
Session controls - implement auto-logout, restrict concurrent sessions, and reduce the window for account takeover with short-lived sessions.
Data encryption - for cases when an employee or a customer uses a compromised network and their data is intercepted, it’s crucial that your data is unreadable to anyone but the intended recipient.

Payment Labs provides a secure environment with strictly controlled payment data access and user behavior controls. Layered anti-fraud protections stop fraud attempts before they can infiltrate your system, even in cases of human error.

Payment fraud detection

Fraud keeps evolving, so even if a system is protected, some attackers can get through. According to ACFE, 43% of fraud cases are detected through tips, audits detect 17% of cases, management reviews catch 13% and 5% are discovered accidentally. It’s important to maintain real-time monitoring to identify suspicious activity.

Device and location monitoring - flag logins and transactions initiated from unfamiliar devices or environments and escalate them to the system administrator.
Behavioral analysis - businesses implement alerts for sudden changes in account activity to notice and stop inconsistent transaction patterns before money changes hands.
Audit trail - to see what went wrong and at what point, a detailed audit trail needs to be maintained within a payment system.
Chargeback and refund monitoring - intuitive access to chargebacks and refunds data allows you to identify potential fraud attempts quicker.
Alerts and notifications - automated admin alerts need to notify the business about high-risk actions for quick intervention.

In Payment Labs, users are assigned multiple different access levels to prevent bad actors from sending payments. Our ledger and transaction history reports provide a full audit log showing what was sent out and to whom. Automated alerts ensure suspicious activity is flagged and potentially compromised accounts are locked.

Role of payment management software in payment fraud prevention

Payment fraud is often enabled by human error but the right payment automation solution addresses areas where preventable errors could occur.

Ensure identity verification during onboarding as well as at every login, device change, or other significant action.
Monitor and flag unusual transactions, escalating problematic actions to an administrator.
Proprietary risk scoring helps automatically pause high-risk transactions if irregular location, device, or behavior is detected.
Segregation of duties helps make sure the person creating the payment can’t be the one to approve it.
Up-to-date data encryption ensures that your operations aren’t compromised even if some of the transaction data is leaked.
The audit trail and history provide transparency and responsibility for everyone using the system.
Real-time and historic transaction reports need to be available in intuitive dashboards that help see risky trends or anomalies.

How to respond to payment fraud suspicion

The basic procedure to use when you suspect payment fraud in your operations includes several crucial steps.

Pause the activity - freeze the affected account, revoke sessions, and force password resets.
Verify the anomaly - review the activities, contact the supposed sender and recipient, check the audit logs and reports.
Escalate and report - notify relevant staff members, contact banking partners if transactions were completed, and report the suspicious activity to law enforcement if the fraud is confirmed. You also have to inform the affected sender and recipient about any fraud that occurred.
Prevent future incidents - identify what enabled the fraud, update procedures for staff, adjust technical settings and policies.

How Payment Labs prevents payment fraud

Payment Labs integrates advanced anti-fraud capabilities that stop fraud before the damage occurs. With role-based permissions, detailed audit logs, advanced encryption, multi-factor authentication, device checks, 24/7 live support, and much more, Payment Labs cuts off both internal and external fraud before fraudulent activity happens.

Fraud damages an organization's reputation, undermines workplace culture, and creates hidden costs beyond the direct fraud losses, such as additional audits, legal fees, and investigations. Book a call with Payment Labs to see how we can automate domestic and cross-border payments and protect your business from payment fraud.