Brazil’s e-commerce market continues to grow at a fast pace—the Brazilian E-Commerce Association (ABComm) projects a 10.6% increase in 2024 compared to the previous year. But with that growth comes a persistent concern for online merchants: fraudulent purchases. The financial losses caused by these transactions are among the biggest challenges to maintaining a healthy business.
In this article, we explore the main types of credit card fraud that lead to costly chargebacks, examine the behavior of fraudsters, and show how PagBrasil’s PagShield® provides an effective way to protect your online store from fraud.
What Are the Different Types of Credit Card Fraud in Brazil?
Brazil ranks among the countries with the highest levels of online payment fraud. In 2023 alone, out of approximately 280 million e-commerce credit card transactions, 3.7 million were identified as fraudulent attempts. While that represents just 1.4% of total transactions, the resulting losses reached BRL 3.5 billion (around USD 700 million), according to the 2023 Fraud Map report.
Many merchants still view fraud as an unavoidable cost of doing business online. However, understanding the different types of fraud and the behavior of fraudsters—and implementing a robust fraud prevention solution—is essential to minimize financial losses and protect business performance.
What Is Card-Not-Present Fraud?
Card-not-present (CNP) fraud is one of the most common types of e-commerce fraud. In this kind of transaction, the customer does not need to physically present the card, which makes it easier for fraudsters to carry out unauthorized purchases. Criminals can obtain card information in several ways, including:
- Phishing: Social engineering techniques that trick victims into revealing their financial details.
- Cyberattacks: Breaches of online store databases where customer information can be accessed.
- Dark Web: The purchase of leaked or stolen card data obtained through cyberattacks.
These fraudulent transactions often go unnoticed until the cardholder reviews their statement and finds unauthorized charges.
To mitigate this type of fraud, online merchants must adopt real-time monitoring and behavioral analysis tools.
PagShield®, for instance, uses advanced technology that analyzes the purchasing behavior of Brazilian consumers and detects suspicious transactions before they are processed, helping merchants reduce chargebacks and protect their revenue.
What Is Friendly Fraud (Chargeback Fraud)?
Friendly fraud (chargeback fraud) is a more complex type of fraud because, in many cases, the buyer is the legitimate cardholder.
In this scenario, the customer makes a legitimate purchase but later requests a chargeback—either intentionally or by mistake. There are two main types of friendly fraud:
- Intentional friendly fraud: The buyer purchases products or services with the intention of later disputing the charge to obtain a refund while keeping the goods.
- Accidental friendly fraud: This occurs when a family member or friend makes a purchase without the cardholder’s knowledge or consent, often leading to confusion and unintentional chargeback requests.
To help prevent accidental friendly fraud, merchants should implement a clear soft descriptor on credit card statements. This makes it easier for consumers to recognize their purchases and reduces unnecessary disputes.
What Is Card Testing?
Card testing fraud is a technique used by criminals to verify whether stolen credit card information is still valid.
In these cases, the goal isn’t necessarily to purchase goods but to test if the card details work. Fraudsters often use bots or automated scripts to perform multiple small transactions in a very short period of time.
The consequences of card testing fraud include:
- High chargeback rates: Fraudulent transactions often lead to chargeback requests, which can result in businesses being labeled as “high risk” or losing the ability to process transactions altogether.
- Direct financial losses: In addition to processing costs, merchants are typically held responsible for the value of unrecognized transactions, resulting in significant financial losses.
- Damage to brand reputation: A company’s image can suffer when consumers share negative experiences or lose trust in the merchant’s checkout security.
To protect against card testing fraud, merchants should monitor suspicious behavior patterns, such as unusually low-value transactions or multiple purchase attempts in quick succession.
Implementing an advanced fraud prevention solution such as PagShield® can be an effective strategy, enabling merchants to identify and block fraudulent transactions before they occur.
What Is Identity Theft Fraud?
Identity theft fraud—also known as full identity fraud—is one of the most damaging forms of credit card fraud. In these cases, criminals steal personal information such as national ID numbers, tax IDs (like Brazil’s CPF), and banking details to make fraudulent transactions.
Common methods used to obtain this information include:
- Phishing: Techniques that trick victims into revealing personal or financial information.
- Social media: Personal details shared publicly can be collected and used for fraudulent purposes.
- Discarded documents: Bank statements or other paperwork containing sensitive data can be retrieved and exploited if not properly disposed of.
The main difference between identity theft fraud and typical card fraud is the scale of the impact: While card fraud usually affects a single account, identity theft can cause long-term credit and reputational damage. Victims often face a lengthy recovery process to restore their identity and financial credibility.
For e-commerce merchants, identity theft fraud represents a significant risk. PagShield® uses advanced technology to analyze purchasing behavior and detect suspicious transactions, helping businesses stay protected from these high-impact fraud scenarios.
How Does Fraud Impact E-Commerce Businesses?
Fraud does not just affect individual transactions—it has a wide-ranging impact on online businesses. From direct financial losses to increased chargebacks and even damage to brand reputation, the effects can be significant and long-lasting. Understanding these consequences is key for e-commerce merchants looking to protect both their revenue and customer trust.
- Direct financial losses: Credit card fraud can result in substantial financial losses. Merchants often have to cover payment processing fees, refunds, chargeback costs, and, in many cases, the value of the shipped goods—all of which can seriously impact the financial health of the business.
- Increased chargeback rates: Fraudulent transactions are one of the main causes of chargeback requests. When merchants face a high volume of chargebacks, they may be penalized by acquirers and payment providers, resulting in fines or even the termination of their payment processing contract.
- Reputational damage: An e-commerce site that fails to manage fraud effectively can suffer significant reputational damage. Negative reviews and poor customer experiences can spread quickly on social media and review platforms, leading to a loss of consumer trust.
How to Protect Your E-Commerce Business with Robust Fraud Protection
Given the prevalence of credit card fraud, it is essential for merchants to implement effective strategies to protect their businesses. Using a robust fraud prevention solution like PagShield® from PagBrasil can be a decisive step in enhancing transaction security.
- Customizable: PagShield®’s scoring slider assigns a risk score to each order based on your operation’s profile. You can also rely on guidance from our fraud prevention team on best practices tailored to your industry.
- Real-time monitoring: PagShield® uses intelligent learning algorithms to analyze consumer purchasing behavior. This technology is specially adapted to the unique characteristics of the Brazilian market, ensuring that suspicious behavior patterns are detected and fraudulent transactions are blocked in real time.
- Transaction pre-authorization: With this feature, we ensure that no legitimate orders are lost. Pre-authorized orders are reviewed manually, allowing for careful verification. PagBrasil’s fraud prevention team also provides detailed guidance and training, offering insights on how to effectively analyze these orders.
Safeguard Your Online Store with PagShield®
Credit card fraud remains one of the biggest challenges for e-commerce merchants in Brazil. Given the complexity and variety of methods used by fraudsters, it is essential for merchants to be well-informed and prepared to face these risks.
Implementing an effective fraud prevention solution, such as PagShield®, provides the security your business needs to reduce chargeback rates. With advanced monitoring technology and proactive prevention strategies, merchants can mitigate the impact of fraud, protect their revenue, and maintain customer trust.
E-commerce security is not just a necessity—it is a competitive advantage in an increasingly challenging market.
By investing in the protection of your business, you safeguard both your financial health and your brand’s reputation, while fostering customer loyalty.
Now that you understand the main types of credit card fraud in e-commerce—and how PagShield® helps prevent them—schedule a conversation with our specialists to see how your business can stay protected.
