Payment fraud is when a payment is processed against a card or other payment details that have been obtained illegally.
In most cases the card holder would not be aware that the details have been compromised until a fraudulent transaction has been processed.
When a payment is processed against a merchant account, the merchant takes liability for any potential fraudulent chargebacks ultimately causing loss of funds for the merchant.
In the event that a transaction is processed using fraudulent details, the affected card holder will lodge a chargeback request with their bank to recover the funds. The risk for the merchant in this scenario is that the transaction may be reversed from their account after a service or goods have been provided.