How to Prevent Payment Fraud: An Essential Guide for Singapore Businesses

Singapore’s digital economy is a global powerhouse, with e-commerce transaction value projected to exceed US$14 billion by 2027. This explosive growth, driven by a digitally-savvy population, presents immense opportunities. However, it also casts a long shadow: a sophisticated and rapidly evolving payment fraud landscape.

According to the Singapore Police Force, victims of scams and cybercrime lost over SGD 650 million in a single year. For a business, fraudulent transactions are not just isolated financial losses. They trigger a cascade of negative consequences, including chargeback fees, operational costs, damage to brand reputation, and a permanent erosion of customer trust.

For any business operating in Singapore, from a new e-commerce startup to an established retailer, a robust fraud prevention strategy is no longer a technical option. It is a fundamental requirement for survival, growth, and maintaining a competitive edge. This guide provides a detailed breakdown of the most common fraud types in Singapore and lays out a multi-layered strategy for effective prevention.

Common Types of Payment Fraud in Singapore

1. Card-Not-Present (CNP) Fraud

This occurs when criminals use stolen credit or debit card details for online or over-the-phone purchases. Since the physical card isn’t present to be verified, it is the most common type of fraud targeting e-commerce businesses.

• Business Example: An online electronics store in Singapore receives an order for three high-end headphones to be delivered to a local address. The payment is made with credit card details stolen from a tourist. The legitimate cardholder eventually disputes the charge, and the merchant loses both the product and the revenue, on top of being hit with a chargeback fee.
• Impact: Direct product and revenue loss, plus increased chargeback ratios which can lead to higher processing fees from banks.

2. Phishing and Account Takeover (ATO)

Fraudsters impersonate trusted entities—such as banks (DBS, OCBC), government services (SingPass, IRAS), or delivery companies (SingPost)—to trick users into revealing their login credentials. Once they gain access, they take over the account to make unauthorized purchases using stored payment details.

• Business Example: A customer of a popular online grocery platform falls for a phishing email and reveals their password. A fraudster logs into their account, changes the delivery address to a different HDB block, and orders hundreds of dollars’ worth of premium goods using the customer’s saved credit card.
• Impact: Leads to customer disputes, chargebacks, and significant damage to the brand’s reputation for security.

3. Chargeback Fraud (or “Friendly Fraud”)

This happens when a legitimate customer makes a purchase and then falsely disputes the transaction with their bank, claiming they never received the item, the transaction was unauthorized, or the product was not as described.

• Business Example: A customer orders a designer dress from a local fashion boutique’s website. After receiving it, they file a chargeback, claiming the transaction was fraudulent. The bank, often siding with the cardholder by default, reverses the payment. The merchant is now out of pocket for the dress, the shipping cost, and a chargeback penalty.
• Impact: Direct revenue loss and product loss. A high chargeback rate can classify a business as “high-risk,” leading to account termination.

4. Identity Theft and Synthetic Identity Fraud

Criminals use stolen personal data, such as NRIC numbers and addresses obtained from data breaches, to create new “synthetic” identities. These fake identities are then used to open bank accounts, apply for credit, or make fraudulent purchases.

• Business Example: A fraudster uses stolen identity details to apply for a “Buy Now, Pay Later” (BNPL) service. They then use this approved account to purchase a high-value item from a merchant, making only the first small installment payment before disappearing.
• Impact: The merchant ships the goods but never receives the full payment, while the BNPL provider is left with the debt.

9 Proven Fraud Prevention Strategies for Singaporean Businesses

1. Enable All Standard Card Security Features

• CVV (Card Verification Value): Always require the 3 or 4-digit code on the back of the card. This proves that the person making the purchase likely has the physical card.
• AVS (Address Verification System): AVS checks if the billing address entered by the customer matches the address on file with the card issuer. While not as widely used for non-US cards, it can be an effective check for certain international transactions.

2. Mandate 3D Secure 2.0 (3DS2)

This is one of the most powerful fraud prevention tools. 3DS2 adds a layer of authentication, usually an OTP (One-Time Password) sent to the cardholder’s mobile phone. Its key benefit is the liability shift: for any 3DS2-authenticated transaction, the financial liability for a fraudulent chargeback shifts from you (the merchant) to the card-issuing bank.

3. Partner with a PCI DSS Compliant Payment Platform

Instead of handling sensitive card data on your own systems, use a payment platform that is PCI DSS Level 1 certified, like Razorpay. The gateway securely captures, encrypts, and transmits card data, drastically reducing your compliance burden and risk.

4. Leverage AI and Machine Learning for Real-Time Detection

Modern fraud detection is no longer manual. A smart payment platform uses AI to analyze thousands of data points in milliseconds to generate a risk score for each transaction. Key checks include:

• IP Geolocation & Proxy Detection: Does the transaction’s IP address match the billing country? Is it coming from a known fraudulent server?
• Velocity Checks: Flagging an unusual number of transactions from the same card or IP address in a short time.
• Device Fingerprinting: Analyzing the device used for the purchase to see if it has been associated with fraud before.

5. Implement Manual Review for Red Flag Orders

While AI handles most transactions, your team should be trained to spot and manually review orders with suspicious characteristics:

• Unusually Large First-Time Orders: Especially for high-demand products.
• Mismatched Billing and Shipping Addresses: Particularly if the shipping address is in a high-risk region or a freight-forwarding service.
• Suspicious Email Addresses: Emails with random numbers and letters (e.g., asdfg876@gmail.com).
• Multiple Orders to the Same Address with Different Cards.

6. Secure Your Shipping and Delivery Process

• Proof of Delivery: Always require a signature on delivery for high-value items.
• No Re-Routing: Have a strict policy against redirecting packages after they have been dispatched, as this is a common tactic used by fraudsters.

7. Maintain Clear and Transparent Store Policies

Clear and easily accessible refund, return, and shipping policies can deter some forms of friendly fraud. If a customer understands the proper process for a return, they are less likely to resort to a chargeback.

8. Secure Your Website with SSL/TLS

An SSL/TLS certificate is non-negotiable. It encrypts the data transmitted between your customer’s browser and your server, protecting login credentials and personal information from being intercepted. Browsers will flag your site as “Not Secure” without it.

9. Continuously Train Your Team

Your customer service and order fulfillment teams are your first line of defense. Train them regularly on how to spot suspicious orders, what to do when they find one, and the importance of following security protocols.

How Razorpay Protects Singaporean Businesses

• PCI DSS Level 1 Certified Infrastructure: We handle all sensitive card data within our ultra-secure vault, drastically reducing your compliance scope and risk.
• Powerful AI-Driven Fraud Detection Engine: Our proprietary system monitors every transaction in real-time, using machine learning to identify and block fraudulent attempts before they can cause damage.
• Full 3D Secure 2.0 Support: We enable 3DS2 for all transactions, protecting you with the liability shift and ensuring compliance with MAS recommendations.
• Comprehensive Compliance and Security: Our platform provides end-to-end security, freeing you to focus on growth while we manage the complexities of fraud prevention.

Conclusion

In Singapore’s fast-paced digital market, building and maintaining customer trust is paramount. Payment fraud represents a direct threat to that trust and to your bottom line. While completely eliminating fraud is impossible, a proactive, multi-layered security strategy is the best defense.

By combining robust security protocols with a trusted, technologically advanced payment partner like Razorpay, businesses in Singapore can effectively minimize their risk, protect their customers, and continue to grow with confidence.

Frequently Asked Questions (FAQs)

1. What is the most common type of online payment fraud in Singapore?

Card-Not-Present (CNP) fraud remains the number one threat, accounting for the majority of fraudulent online transactions. This is why tools like CVV checks and 3D Secure 2.0 are so critical for e-commerce businesses.

2. As a small business in Singapore, do I really need to worry about PCI DSS?

Yes. PCI DSS compliance is mandatory for any business, regardless of size, that handles payment card data. The easiest and most secure way for a small business to comply is by using a PCI DSS Level 1 certified payment platform like Razorpay, which removes the need for you to handle sensitive data directly.

3. Will adding fraud checks like 3DS2 hurt my sales conversion rates?

Modern systems like 3D Secure 2.0 are designed to be “frictionless.” They use risk-based analysis to only challenge high-risk transactions with an OTP. The vast majority of legitimate customers will have a smooth, uninterrupted checkout experience, while you gain significant protection.

4. What is the first thing I should do if I suspect a fraudulent order?

Do not ship the goods. Immediately contact your payment platform to report the suspicion and place the order on hold. They can provide more