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Fraud Risks in Cross-Border Payments and Why International Transactions Are Targeted

Written by PayShield

April 3, 2025

In order for businesses to access worldwide markets and serve a diverse customer base, cross-border payments have emerged as an essential part of global commerce. But the increase in international trade has also made businesses more susceptible to fraud. Due to regional variations in payment infrastructure, currency conversions and regulations, international payments are by nature more complicated. The probability of fraudulent activities, unauthorized transactions and payment failures is increased by this complexity.

Because they can take advantage of discrepancies in regional verification standards, mismatched consumer data and inconsistent fraud detection techniques, fraudsters target cross-border payments. In cross-border payments, card-not-present (CNP) fraud, identity theft and money laundering are especially common. To get beyond security measures, criminals use stolen credentials or fake identities.

Securing cross-border transactions is essential for merchants, Payment Service Providers (PSPs) and Payment Facilitators (PayFacs) in order to preserve income and prevent any fraud or chargebacks from occurring through proactive strategies such as fraud deflection. Increased processing expenses, strained business ties and the possibility of account termination if fraud ratios surpass acceptable thresholds are all consequences of high dispute rates. Businesses must employ focused fraud prevention techniques that take into consideration the particular difficulties associated with overseas transactions in order to mitigate these risks, all the while maintaining adherence to national and international laws.

The complexity of global payment networks and the absence of standard safety measures across countries make cross-border transfers especially susceptible to fraud. International payments, in contrast to domestic transactions, include a number of intermediaries, several currencies and differing regulatory requirements, all of which provide substantial opportunities for fraudsters to take advantage of.

The large amount of card-not-present (CNP) transactions that are processed as cross-border payments is one of the main reasons businesses can be more susceptible to fraud and chargebacks. Fraudsters can more easily use stolen card information or fake customer identities to complete illegal payments when there is no physical card verification. Geographic mismatches and problems with currency translation make the task much more difficult. 

Regional variations in authentication further raise the possibility of fraud. Because customer verification standards differ by area, scammers can more easily take advantage of lax identity checks. In order to get around security measures and finish transactions undetected, fraudsters frequently use credentials that have been stolen or faked identities.

The restricted exchange of fraud data among areas worsens these difficulties. Payment stakeholders are unable to obtain real-time fraud intelligence due to data privacy regulations and disjointed payment systems, which makes it more difficult to identify new fraud trends in various markets. The overall fraud risk for foreign transactions rises as a result of fraudsters being able to target these vulnerabilities again due to this lack of visibility.

As cross-border payments are complicated and lack comparable security measures across countries, they are a major target for fraudsters. In order to leverage international payment channels, fraudsters take advantage of weak authentication procedures, irregularities in payment infrastructure and gaps in data exchange. Particularly common in cross-border transactions are a number of fraud categories.

One of the risks to cross-border payments that is expanding the fastest is synthetic identity fraud. Fraudsters establish a convincing but fake identity by fusing authentic names, residences and birthdates with fictitious social security numbers or identity documents. After then, these fictitious identities are utilized to process payments and open accounts in other locations. It’s frequently challenging for banks and payment processors to identify fraud until after the transaction is finished because the information seems somewhat authentic.

Another popular strategy is account takeover fraud, in which payment information or login credentials are obtained and used to make illegal payments in several nations. In order to get over conventional security checks, fraudsters frequently obtain this information through phishing attempts or data breaches. It is simpler for fraudsters to transfer money across borders without setting off alarms when payment networks function in disjointed ecosystems.

Another major issue in international trade is triangulation fraud. Using stolen payment information, scammers buy items or services and then ship them to an unwary middleman or third parties. When the cardholder contests the transaction, the original merchant is left to pay the loss after the products are profitably resold. It is frequently challenging for merchants to identify and address these fraudulent transactions due to the intricacy of international shipping and fulfilment.

When genuine customers fraudulently contest foreign transactions, this is known as “friendly fraud”. Merchants frequently find it difficult to contest these claims because of the lengthier processing timeframes and varied dispute resolution procedures in various markets. Knowing that merchants have a lower chance of successfully recovering payments from cross-border disputes, fraudsters take advantage of this gap.

Last but not least, money laundering via international routes continues to be a serious issue. The intricacy of global financial flows is used by scammers to hide the source of illegal funds. They complicate the tracking and tracing of suspicious behavior for financial institutions and authorities by transferring funds across several payment networks and currencies. Identifying and blocking these money laundering operations is made more difficult by the absence of centralized control in cross-border payments.

A multi-layered strategy that incorporates enhanced authentication, real-time monitoring and regional compliance requirements is necessary to reduce the risk of fraud in cross-border payments. Businesses must modify their fraud protection tactics to take into consideration regional, legal and behavioral variations across markets due to the complexity of global payment networks.

Regulations differ by area, for example, the Payment Services Directive 2 (PSD2) in Europe requires Strong Customer Authentication (SCA) for online transactions. The risk of fraudulent transactions is decreased by putting systems like 3D Secure 2 (3DS2) into place, which ensure that the cardholder’s identity is confirmed throughout the payment process. Adapting authentication procedures to local laws enhances approval rates while upholding security requirements.

To identify questionable conduct in cross-border transfers, real-time transaction monitoring, available through PayShield’s Transaction Risk API Tool, is essential. To examine trends, transaction volumes and regional discrepancies, businesses should make use of machine learning and transaction data. For instance, the system may automatically flag a transaction for additional examination if several high-value transactions are made from the same account in several nations in a brief period of time. This enables companies to prevent fraudulent transactions prior to their processing.

IP Matching and Geo-Blocking

Reducing fraud can be achieved by blocking high-risk areas and making sure the IP address of the payment matches the country that issued the card. Businesses have the option to immediately refuse a payment or request extra authentication if it comes from a nation other than the one where the card is issued. Limiting exposure to high-risk areas with high rates of payment fraud is made easier by geo-blocking. 

Enhanced Identity Verification and KYC

During the onboarding process, fraud can be avoided by strengthening Know Your Customer (KYC) procedures. Stronger defence against stolen credentials and fake identities is offered via multi-factor authentication (MFA), biometric verification and identity document validation. Businesses can also prevent fraudulent sign-ups and unlawful transactions by using enhanced KYC methods.

Cutting Down on False Declines

Excessive fraud detection systems may inadvertently prevent valid international payments, which could result in unhappy customers and lost income. Without sacrificing security, companies can increase acceptance rates by enhancing fraud deflection models and implementing dynamic risk assessment and payment routing. A well-rounded approach to fraud deflection guarantees seamless payment completion for legitimate customers.

How PayShield Helps Businesses Combat Cross-Border Fraud

In order to minimize exposure to fraudulent behavior and assist businesses in navigating the intricacies of cross-border payments, PayShield provides a suite of sophisticated fraud protection technologies. PayShield gives companies the means to safeguard revenue streams and secure global transactions by utilizing real-time data and automated dispute resolution.

PayShield’s Transaction Risk API Tool

PayShield’s Transaction Risk API improves fraud deflection through real-time analysis of behavioral patterns, network signals and identification data. This lowers the possibility of fraudulent payments and raises authorization rates overall by enabling firms to evaluate transaction risk prior to approval and route the transaction appropriately.

Authentication via 3D Secure (3DS)

To provide an additional degree of security for card-not-present (CNP) transactions, PayShield can provide 3D Secure 2.2 (3DS). Businesses may increase their fraud defences and decrease illegal transactions by demanding customer verification at the checkout stage.

Dispute Intelligence & Chargeback Alerts

PayShield offers real-time Chargeback Alerts across major card networks through its partnership with Ethoca and Verifi. By doing this, companies can resolve disputes before they become chargebacks, which lowers chargeback ratios and increases recovery rates. By automating the response to Chargeback Alerts, PayShield’s Dispute Intelligence can lower operating expenses while safeguarding chargeback ratios.

PayShield helps companies protect cross-border transactions, reduce fraud losses and enhance payment performance by fusing real-time fraud deflection, authentication and automated dispute resolution.

Summary

Businesses can grow significantly through cross-border payments, but there are special risks associated with fraud and payment security. Due to the intricacy of international transactions, which is caused by differing legislation, problems with currency conversion and uneven verification standards, fraudsters can flourish. Businesses must implement a proactive and focused fraud protection plan since fraud techniques including money laundering, triangulation fraud and synthetic identity fraud are especially common in cross-border payments.

To reduce the risks involved in foreign transactions, merchants, PSPs and PayFacs must put strong fraud detection, improved customer authentication and efficient dispute resolution in place. Businesses can reduce fraud while increasing authorization rates and customer trust by utilizing real-time transaction monitoring, pattern analysis and localized compliance procedures.

PayShield provides a full range of solutions to assist companies in overcoming these obstacles. We give companies the resources they need to lower their risk of fraud, settle conflicts quickly and boost cross-border payment acceptance rates.

Are you prepared to improve the security of your international payments? Get in touch with PayShield today to find out how our dispute resolution and fraud deflection services can safeguard your company and your foreign revenue sources.

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