As business management software evolves into financial experience hubs, embedding payments is no longer just a competitive edge—it’s a core expectation. But with this new capability comes new risks, responsibilities, and misconceptions about fraud that can have far-reaching consequences for your business and your merchants. If you’ve embedded payments in your software, this is one blog post you won’t want to skip over.
We've seen firsthand how software platforms that misunderstand fraud inadvertently expose themselves to regulatory scrutiny, financial losses, and erosion of brand trust. So, as you chart your roadmap it's critical to separate fraud myths from reality, proactively build fraud resilience into your platform's DNA and make sure you're adequately protected.
Myth #1: “Fraud is a merchant problem.”
It’s easy to assume that fraud is something your merchants need to worry about. After all, they’re the ones selling goods and services, right? But as their software payment partner, your platform is the linchpin connecting merchants, buyers, and the wider financial ecosystem.
Why this matters:
When a fraudulent transaction occurs, the consequences don’t necessarily stop with the merchant. Card schemes and regulators are increasingly holding platforms accountable for the integrity of their payment transaction flows. If a merchant can’t absorb chargeback losses or is found to be negligent, for example, the liability—and the cost—may roll up to the software platform.
Real-world impact:
Imagine a scenario where a single bad actor slips through your onboarding checks and runs a series of fraudulent transactions. If those chargebacks aren’t resolved, your platform—not just the merchant—could face financial penalties, increased reserve requirements, or even a freeze on payment processing. Platforms are seen as stewards of trust and compliance, so failing to own this responsibility can put your entire software business at risk.
Myth #2: “Basic KYC is enough.”
Many software platforms believe a simple Know Your Customer (KYC) check at merchant onboarding is sufficient to weed out fraudsters. But today’s threat landscape is far more complex and evolving daily.
Why this matters:
Fraudsters are using synthetic identities, fake documents, and even deepfake technology to bypass basic checks. Static, rules-based onboarding may catch obvious red flags, but it can’t keep pace with evolving tactics spurred by innovative technologies. Instead, platforms need to consider deploying a layered, adaptive verification—combining document checks, biometric signals, behavioral analytics, and continuous monitoring.
Real-world impact:
Consider a software platform that onboards a new merchant using only basic document uploads and a quick ID check. If that identity is fake, the fraudster can operate undetected, process high-risk transactions, and disappear before chargebacks hit. Should this happen, your platform could be left holding the bill, but more importantly, your reputation may take a hit too with both merchants and regulators because of the oversight.
Myth #3: “We’ll deal with fraud later.”
Fraud prevention often feels like a problem for the future; something to address after launching payments or scaling the initiative. Please know that waiting is not a strategic option in today’s changing landscape.
Why this matters:
Robust fraud controls are now a baseline requirement for card network compliance. Platforms must show end-to-end risk management: from onboarding and transaction monitoring to dispute resolution and ongoing merchant reviews. Delaying investment in these capabilities can jeopardize your ability to operate or expand.
Real-world impact:
If you’re caught off guard by a fraud incident or regulatory audit, the consequences can be severe—network fines or even being barred from processing payments. Proactive fraud management isn’t just about avoiding losses; it’s about enabling sustainable growth and protecting your business.
Beyond misconceptions: Why proper fraud prevention matters for software platforms (not just merchants)
- Regulatory compliance: The regulatory bar for platforms has never been higher. Card networks and financial regulators expect platforms to actively manage onboarding, monitor for suspicious activity, and resolve disputes swiftly. Falling short isn’t just a technicality—it can mean penalties, lost registration, or reputational damage that may be hard to repair.
- Financial exposure: Fraud and chargebacks don’t just affect your merchants. When a merchant can’t cover losses, your platform is on the hook. This can erode margins, disrupt cash flow, and even threaten your business’s viability—especially in high-growth or thin-margin environments.
- Brand trust: User trust is everything. A single, high-profile fraud incident can erode merchant and customer confidence overnight. The platforms that invest in robust payment fraud prevention see higher retention, lower operational costs, and stronger brand loyalty over the long term.
How forward-thinking platforms are combatting rising fraud
The possibility of fraud can be overwhelming, but when you’re embedding payments, fraud becomes part of your business’ reality. But you don’t have to go at it alone. Working with an experienced payments provider that can help protect your platform and your merchants with advanced fraud controls, education, transaction monitoring, and innovative fraud prevention solutions is paramount to long-term success with embedded financial services. Below are some of the tactics leading software platforms are leveraging today to fight back against fraud.
- Investing in advanced fraud controls: Going beyond basic KYC, platforms are deploying adaptive, AI-powered risk management, behavioral analytics, and real-time monitoring to catch threats before they escalate.
- Monitoring transactions continuously: Treating onboarding as a one-and-done event is a thing of the past. Instead, leading platforms are using ongoing analytics and collaborative intelligence to detect suspicious patterns and intervene early.
- Educating and empowering merchants: Sharing best practices, setting clear expectations, and providing tools to help your merchants recognize and prevent fraud on their end is critical.
- Prioritizing compliance and resilience: Regularly reviewing policies and controls to ensure the platform meets—and exceeds—card network standards. In addition to building fraud prevention into their platform’s core infrastructure and not treating it as an afterthought.
- Partnering with a fraud-focused payments provider: Working with a payments partner who understands the payments fraud landscape and offers products specifically designed to combat new waves of fraud for the platforms and the platforms users (the merchants.)
Embedding payments can supercharge your platform’s growth—but only if built on a foundation of trust, security, and compliance. As fraud evolves, so must your defenses.
By working with a payments partner such as Worldpay for Platforms, you will have a dedicated team of experts that will help you proactively prevent and detect payment fraud – from ensuring your payments security is compliant to establishing strong fraud detection systems and processes.
To learn more about how you can build a fraud-resistant, compliant, and trusted payment experience, dive into our eBook.