Winning the Fight Against E-commerce Fraud: How PSPs Help Merchants Stay Ahead

As e-commerce continues to boom, so does the risk of payment fraud. With bad actors becoming more sophisticated, UK merchants are facing not only rising financial losses but also risks to their reputations and customer trust.

In 2023 alone, UK retailers lost £392 million to e-commerce fraud. Card-not-present (CNP) fraud – where stolen card details are used to make online purchases – remains the most prevalent threat. By mid-2024, losses from remote purchase fraud had risen 11% to £193.7 million, according to UK Finance.

But it’s not just merchants who are under attack. Consumers in the UK lost over £11 billion to online fraud in 2024. Groups like UK Finance and Which? have since urged the government to demand more action from tech and telecoms providers to protect the public.

While in-house security measures are essential, partnering with a modern payment service provider (PSP) can significantly reduce fraud exposure and improve prevention efforts.

Common types of fraud merchants face

Merchants navigating the digital space commonly deal with:

Card-not-present (CNP) fraud
Fraudsters use stolen card details – often sourced from breaches or the dark web – to make unauthorised purchases online, where no physical card is needed.

Friendly fraud (chargeback fraud)
A legitimate customer makes a purchase, then falsely disputes the charge. This results in chargebacks, penalties, and lost revenue.

Account takeover
Cybercriminals gain control of customer accounts through phishing or credential stuffing, enabling them to make purchases or steal sensitive data.

Refund fraud
Customers claim false non-delivery or return different items to get illegitimate refunds, leading to both financial loss and inventory issues.

These threats affect more than the bottom line – they damage brand trust, increase processing fees, and create operational headaches.

How payment providers strengthen fraud defences

Today’s PSPs do more than handle transactions – they’re vital partners in fraud prevention.

Real-time monitoring
Using machine learning and rule-based systems, PSPs flag suspicious transactions as they happen – such as IP mismatches or unusual spending patterns.

Customisable fraud rules
Providers like Ecommpay offer flexible fraud filters, enabling merchants to adjust for risk level, geography, product type and more – balancing protection with customer experience.

Behavioural analytics and fraud rings
Ecommpay’s in-house fraud engine detects complex fraud patterns, using graph analysis to reveal linked credentials and interconnected bad actors. These tools help identify threats early – often before the fraud is even attempted.

3D Secure 2 (3DS2) & Strong Customer Authentication (SCA)
Mandated under PSD2, these protocols require multi-factor authentication and have led to a marked decline in fraud post-enforcement, as reported by the FCA.

Tokenization and data protection
Replacing card data with tokens means even if data is compromised, it’s useless to attackers – greatly reducing exposure.

Smart routing and cascading
If a payment raises red flags or fails, PSPs can re-route it through safer channels – maximising conversions while maintaining fraud control.

Chargeback management
PSPs assist with dispute resolution, offering tools and expertise to fight illegitimate chargebacks and reduce future occurrences.

Compliance matters, too

Fraud prevention isn't only technical – it’s regulatory. PSPs help merchants stay compliant with evolving standards like:

• PSD2 and SCA: Requiring secure multi-factor authentication.
  
  
  
• PCI DSS: Setting security protocols for processing card payments.
  
  
  
• AML and KYC: Ensuring that transactions are verified and not linked to criminal activity.
  

By tracking regulatory shifts and advising merchants, PSPs simplify compliance and reduce risk.

Best practices for working with your PSP

To get the most from a PSP partnership:

• Stay in regular contact with your account manager and risk team.
  
  
  
• Use analytics tools to spot suspicious activity and fine-tune your fraud settings.
  
  
  
• Test fraud rules and approval flows to strike a balance between security and conversion.
  
  
  
• Educate your team on fraud detection and escalation procedures.
  

Stronger together: building resilience against fraud

Fraud is evolving, but so are the tools to fight it. With advanced analytics, real-time monitoring, and regulatory support, PSPs like Ecommpay empower merchants to stay ahead of fraudsters and grow with confidence.