strong authentication remains effective but fraudsters are adapting

Why European Payment Fraud Is Still Growing Despite Low Rates

Across the European Economic Area (EEA) the fraud rate held steady at 0.002 % of transaction value in 2024, yet the total monetary loss swelled to €4.2 billion. The paradox of a flat fraud percentage but rising exposure is rooted in higher transaction volumes, cross‑border card usage, and the emergence of new scam tactics that slip past Strong Customer Authentication (SCA).

What the Numbers Really Mean

From €3.4 bn in 2022 to €4.2 bn in 2024, fraud losses have risen by more than 20 %. Card‑payment fraud alone jumped 29 % YoY, while credit‑transfer scams surged 16 %—a trend linked to “SCA‑exempt” transactions where fraudsters manipulate payers into authorising bogus transfers.

Emerging Fraud Vectors: The Rise of “Payer Manipulation”

Traditional fraud types—stolen card details, phishing for login credentials—have been largely contained by SCA. The new threat, however, exploits the very authentication process itself. Criminals now pose as legitimate merchants or service providers, prompting users to approve fraudulent transactions with a genuine SCA code.

Real‑World Case Study: The “Invoice‑Redirect” Scam

A mid‑size German SaaS firm reported that fraudsters intercepted supplier invoices and altered the bank details. The altered invoices were sent with a convincing “urgent payment” note, and employees, using SCA, unknowingly approved the transfers. Within three months the firm lost €1.2 million—highlighting how SCA can be weaponised when the user’s intent is manipulated.

How SCA Still Saves Money—And Where It Falters

Transactions protected by SCA are significantly less likely to be fraudulent, especially for card payments. For credit transfers, the protective effect is weaker because many transfers qualify for SCA exemptions (e.g., low‑value transactions, recurring payments). This creates a fraud “sweet spot” that attackers target.

Future‑Facing Mitigation Strategies

To counter the next wave of scams, the industry is moving beyond SCA:

• Behavioural analytics: Machine‑learning models that detect anomalies in transaction timing, device fingerprinting, and user‑journey patterns.
• Dynamic authentication: Adjusting the level of verification based on risk scores—a simple “one‑click” for low‑risk transfers, but a multi‑factor challenge for high‑risk ones.
• Real‑time communication: APIs that let merchants instantly verify payee details with the payer’s bank, reducing “man‑in‑the‑middle” opportunities.

Regulators are also tightening the net. The European Banking Authority (EBA) is updating the PSD2 guidelines to require stronger justification for SCA exemptions, and the ECB is piloting a cross‑border fraud‑sharing platform.

What This Means for Payment Service Providers (PSPs) and Users

For PSPs, the message is clear: Invest now in intelligent fraud detection. Early adoption of AI‑driven risk engines can turn compliance costs into a competitive advantage. For end‑users, staying vigilant means treating every authentication request as a potential red flag—especially when the request comes with a sense of urgency.

FAQ – Quick Answers to Common Questions

Is the fraud rate really that low?

Yes, at 0.002 % it’s low in percentage terms, but the absolute loss is still in the billions due to the massive volume of EEA transactions.

Can SCA protect credit‑transfer scams?

Only partially. Many credit transfers qualify for SCA exemptions, so fraudsters target those gaps.

What’s the biggest emerging fraud type?

“Payer manipulation” – attackers coerce users into approving fraudulent transfers using legitimate SCA codes.

How can I protect my business from invoice‑redirect scams?

Implement a verification step for any change in bank details, regardless of SCA confirmation.

Will new regulations increase the cost of payment processing?

Possibly in the short term, but they aim to reduce fraud‑related losses, which benefits the whole ecosystem.

Looking Ahead: The Fraud Landscape in 2025 and Beyond

Analysts expect the total fraud loss to keep rising as digital payments expand and cross‑border commerce accelerates. However, the twin forces of stricter regulatory oversight and AI‑driven security will likely reshape the threat map, making “human‑in‑the‑loop” verification a cornerstone of future payment safety.

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