In response to fraud, chargeback write-offs are growing more and more popular, but at what long-term cost? Although this could seem effective in the short run, it is becoming a bigger risk for both Payment Service Providers (PSPs) and merchants.
By specifically focusing on low-value transactions, fraudsters are taking advantage of this change. These microtransactions, which range from card testing abuse to triangulation fraud, are sometimes disregarded because of their small size, but because of their frequency, attackers can profit greatly from them. They can swiftly grow into large losses, inflated fraud ratios and potential reputational risk if left uncontrolled.
The accumulated risk of repeated low-value fraud poses a greater threat to merchants, Payment Facilitators (PayFacs) and acquirers operating in high-risk verticals than the amount of a single chargeback. Staying ahead of this changing threat scenario requires an understanding of how chargeback write-offs are used and exploited. Businesses can prevent these transactions before they result in expensive notifications, disputes or network intervention by putting in place the appropriate fraud deflection measures.
Why is Low Value Fraud Rising?
Criminals are increasingly taking advantage of the industry’s willingness to write off small-dollar transactions as fraud methods change. The average fraud-related write-off by financial institutions is currently only $17.90, according to Mastercard’s 2025 chargeback report. Below this amount, many issuers and merchants consider disputes to be too expensive to look into. Fraud has thrived on this cost-benefit mismatch.
Card testing is a popular technique where scammers use small-value transactions to verify credentials they have obtained. The card is either resold or utilized for more extensive fraud efforts if the transaction is successful. Because of their low value, these small purchases are frequently overlooked, giving the fraudster the opportunity to verify a card’s legitimacy without setting off alarms.
Triangulation fraud is another strategy in which thieves utilize cards they have stolen to make purchases on behalf of unwary third parties. After using stolen credentials to complete the order and collecting payment from a genuine customer, the fraudster vanishes before the chargeback is started. Before expanding their operations, these scams sometimes start with modest transactions to gain trust.
These transactions usually evade formal dispute procedures or manual scrutiny because they are minor. However, these occurrences add up to a high-volume, low-visibility fraud risk that can threaten acquirer relationships and exaggerate a merchant’s fraud percentage. Low-value fraud has the potential to grow into a sizable and undetectable cost driver if preventative steps are not taken.
The Hidden Costs of Chargeback Write-Offs
Allowing low-value disputes to go unnoticed could initially appear to be a sensible compromise, especially if the expense of contesting a chargeback is more than the transaction value. Long-term vulnerabilities can be introduced by this sort of short-term reasoning. Fraud is reported even when a dispute isn’t officially challenged. Issuers provide Visa with TC40 data in the event of card-present or card-not-present fraud allegations, identifying the merchant as a potential source of fraud exposure.
Under Visa’s Acquirer Monitoring Program (VAMP), this is more important than ever. Chargebacks are no longer the only emphasis of the new framework… fraud reports such as TC40s now contribute to a merchant’s total risk profile, even if the fraud did not result in a formal chargeback. Without warning, a high volume of these low-value reports may push merchants closer to intervention requirements.
The cash waste quickly accumulates in addition to the risk of noncompliance. Even if a few dollars wasted on each transaction might not seem like much, the sums add up. More significantly, a pattern of fraud write-offs can lead to increased reserve requirements, greater processing fees and harm to the acquiring institutions’ reputation. This could result in more stringent inspection or, worse, the loss of processing capabilities for merchants.
Every unresolved dispute adds overhead, even in terms of operations. Employees have to examine payment data, record transaction details and evaluate risk exposure, efforts that increase with volume. Low-value fraud is not just an annoyance but also a liability multiplier if it is not identified and prevented early.
How PayShield Helps Prevent Low-Value Fraud at Scale
Merchants can no longer afford to rely only on post-fraud mitigation as fraudsters’ strategies change toward low-dollar, high-frequency transactions. PayShield provides a multi-layered and proactive strategy. We assist merchants, PayFacs and PSPs in preventing fraudulent microtransactions before they cause financial or reputational harm.
PayShield’s Transaction Risk API
Every transaction, regardless of value, receives real-time fraud scoring from PayShield’s Transaction Risk API. Advanced identity signals, behavioral analysis and location-based insights are used to assess even small-dollar payments. The API enables merchants to automatically reject or flag high-risk payments prior to acceptance by identifying card testing patterns (such as rapid-fire low-value charges from the same IP), suspicious customer information and other advanced fraud detection methodologies. PayShield assists companies in eliminating both large and small scale fraud by evaluating microtransactions against richer data signals.
3D Secure 2 (3DS2)
PayShield enables retailers to dynamically implement 3D Secure 2, even though 3DS is typically saved for expensive transactions. 3DS can be used selectively to confirm user legitimacy without interfering with low-risk transactions when a low-value transaction raises suspicions. For example due to mismatched device fingerprints, location abnormalities or velocity thresholds. This guarantees that fraud is prevented at checkout while maintaining a smooth experience for genuine consumers.
Chargeback Alerts & Dispute Intelligence
Chargeback Alerts from Verifi and Ethoca are a last resort for fraudulent transactions that manage to get through. The manual actioning of Chargeback Alerts can even be automated by PayShield’s Dispute Intelligence, guaranteeing that even low-value claims are handled without using internal resources.
Summary
Low-value fraud has grown into a serious problem. Even while a single microtransaction might not seem like much, the total effect of these transactions on fraud ratios, operating expenses and brand reputation is significant. Fraudsters are upping their efforts as issuers increasingly decide to write off minor disputes since they know that these transactions are less likely to result in scrutiny.
Reactive write-offs must give way to automated dispute resolution and real-time fraud deflection. PayShield gives PayFacs, PSPs and merchants the resources they need to identify high-risk microtransactions, easily validate questionable behavior and handle disputes on a large scale.
Don’t keep ignoring low-value fraud. Get in touch with PayShield today to find out how our intelligent fraud prevention solutions can lower chargebacks, stop card testing and triangulation fraud and safeguard your revenue.
