FRAUDULENT TRANSACTION

A fraudulent transaction is any transaction made without the authorization or consent of the cardholder. This can occur when a card, card number, or other secure payment information is stolen and used illegitimately to purchase goods or services. Fraudulent transactions pose significant risks to both the cardholder and the merchant, including financial loss and potential damage to reputation.

The detection and prevention of fraudulent transactions are crucial aspects of payment security. Financial institutions and merchants use various technologies and methods to identify and mitigate fraud risks, such as real-time transaction monitoring, anomaly detection algorithms, and strong customer authentication processes. When a fraudulent transaction is suspected or confirmed, actions such as blocking the transaction, notifying the cardholder, and initiating a chargeback process are typically taken to address the issue.

Consumers are generally protected against liability for fraudulent transactions under regulations like the Fair Credit Billing Act in the United States, which limits their financial responsibility, provided they report the fraud in a timely manner. Meanwhile, merchants may face financial penalties, chargebacks, and increased transaction fees if they process fraudulent transactions, emphasizing the importance of robust security measures in their payment processing systems.