The Role of Fraud Monitoring in Protecting Your Business Transactions

Globally, eCommerce transaction fraud is a big issue, but the US seems to be the hardest hit. 42% of all eCommerce business transaction fraud happens in the US, costing roughly $44 billion annually. Interestingly, statistics show the average US company only spends 10% of its revenue on payment fraud management compared to 15% in Asia and 19% in Latin America.

Despite the daunting statistics, eCommerce revenue lost to payment fraud did dip from 3.6% in 2022 to 2.9% in 2023. Still, chargeback fraud is one of the most common payment fraud types that cost merchants $20 billion globally in 2023.

We'd say those numbers still require action, and fraud monitoring could be the answer. Read on to find out more.

Continuous Monitoring

Fraudulent activities happen at any point—continuous fraud monitoring is essential.

People rarely use traditional methods, including manually scrutinizing transactions or periodic evaluations, which now seem outdated. The only way to monitor fraud is through a system that enables real-time transaction processing.

Modern monitoring tools use continuous monitoring—which involves artificial intelligence (AI) and machine learning (ML)—to track and detect fraudulent activity accurately. These systems constantly evolve, discovering trends that help them understand what is 'normal' for specific businesses or customers.

This active approach is essential.

Identifying and Analyzing Suspicious Activities

Fraud is becoming difficult to avoid—the statistics show that.

Fraud monitoring systems aim to expose fraud patterns and their intelligence, as we just mentioned. The system uses several parameters: transaction amount, frequency, geography, and customer habits.

For example, a fraud prevention system may consider a transfer of funds suspect when the sender's address has never been used on the account before or is above the normal spending range.

Most of the time, there's a step before that now where payment systems ask the customer to open their banking app to confirm the transaction before it's authorized, and declined transactions show as a notification.

The detection of fraud isn't an end in itself. Fraud detection and prevention systems allow businesses to act quickly against fraud attacks and offer ideas about how the attack must be neutralized.

The guidelines may suggest, for example, suspending the account for a certain time or requesting further evidence to authenticate a questionable payment.

Customer and Business Protection

Fraud results in losses for the business and the consumer. Perhaps more damaging is the impact on the reputation of organizations, but ask a consumer victim of fraud, and they'll tell you differently.

No doubt, for businesses, other benefits offered by fraud detection and prevention systems include minimizing loss because of chargebacks (the spending we mentioned in the introduction) and regulatory fines imposed for unauthorized transactions or signature non-matching chargebacks.

For customers, the systems mentioned above guarantee the safety of the individuals and their finances, which protects them from identity fraud and infiltration of their accounts. Well, almost guarantee. Systems for monitoring fraud also help to protect data following the GDPR or PCI DSS guidelines.

Improved Customer Trust

In Q1, 2024, consumers reported 8,734 complaints about fraud and scams—it was a record high. And we guarantee that when the end-of-year statistics are out, it'll be higher. Over 50% of these complaints were related to authorized push payment (APP) scams.

Customer confidence goes hand in hand with safe transactions and data protection. Customers who do not feel their information is secure tend to take their money and support elsewhere. Fraud monitoring solutions can build and maintain trust by ensuring a smooth and frictionless transaction. Studies show that 73% of consumers spend significantly less or stop spending altogether with a brand when trust is lost.

When a customer is alerted about fraud and gets a chance to confirm their identity during a suspicious transaction, they know that their security cuts across every level of the organization. Still, sometimes, this is not the role of the business or the fraud prevention system; it's the payment provider.

Providing information and communicating the key focus areas of combating fraud helps build trust. For example, defending a customer's interest by communicating the available superior tools, like AI-based fraud prevention tools, multi-factor authentication systems, and more. For B2B and big transactions, this can be a deal breaker. There's greater understanding and cooperation, which helps businesses retain their customers.

Fraud prevention is essential. Even with the advanced systems, fraud is a massive problem for businesses and consumers. Still, having these systems in place does help gain consumer trust and confidence, but we'd argue more essentially, it helps to save money. Let's see what the statistics for fraud in 2025 look like!