Key Stat: Canada has one of the highest card-not-present fraud rates in the world. As Canadians increasingly shop online, CNP fraud has grown significantly. Canadian merchants lose approximately $1.2 billion to fraud annually.

Types of Payment Fraud Affecting Canadian Businesses

1. Card-Not-Present (CNP) Fraud

The most common fraud type for Canadian e-commerce. A fraudster uses stolen card details to make online purchases. The real cardholder disputes the charge, and the merchant is left with a chargeback — losing both the goods and the transaction amount.

Who's at risk: Any business accepting online payments

Prevention: Address verification (AVS), CVV requirements, 3D Secure 2.0, Stripe Radar

2. Chargeback Fraud (Friendly Fraud)

A customer receives goods or services but disputes the charge with their bank claiming non-receipt or unauthorized use. This is increasingly common and difficult to fight. In Canada, the chargeback process strongly favors cardholders.

Who's at risk: E-commerce merchants, digital goods sellers

Prevention: Clear refund policies, signed delivery confirmation, detailed transaction records, Interac Online (no chargebacks possible)

3. Stolen Cards (In-Person)

Less common since chip-and-PIN's introduction in Canada (2012), but still occurs with contactless payments over $250 or when fraudsters obtain PIN information.

Who's at risk: Retail, restaurants

Prevention: Require PIN for transactions over $100 (configurable), staff training on suspicious behavior

4. Account Takeover (ATO)

Fraudsters gain access to a customer's account on your platform and make purchases using their saved payment methods. Increasingly common as data breaches expose login credentials.

Prevention: Strong password requirements, 2-factor authentication, anomaly detection

5. Refund Fraud

A customer returns goods they didn't purchase from you, or returns empty boxes, or makes fraudulent return claims. Disproportionately affects electronics and luxury goods retailers.

Tools That Protect Canadian Businesses

Address Verification Service (AVS)

AVS checks the billing address submitted by the customer against the address on file with the card issuer. A mismatch doesn't automatically block the transaction, but it increases fraud risk scores. Available for Visa and Mastercard.

How to enable: Available through Stripe, Helcim, and most processors. Configure in your dashboard under "fraud settings" or "checkout settings."

CVV/CVC Requirement

Require the 3-digit security code for all online transactions. While fraudsters with stolen card databases often have CVV, many don't — this simple check blocks a significant percentage of fraud attempts.

3D Secure 2.0 (3DS2)

3DS2 is an authentication protocol that allows banks to verify cardholders during online transactions. For low-risk transactions, this is frictionless (no extra step). For higher-risk transactions, the customer confirms in their banking app.

Critically, 3DS2 shifts fraud liability from the merchant to the card issuer — meaning chargebacks from 3DS2-authenticated transactions are the bank's problem, not yours.

How to enable: Stripe enables 3DS2 automatically. Helcim supports it through their payment gateway settings.

Stripe Radar (AI-Based Fraud Detection)

Stripe Radar uses machine learning trained on billions of global transactions to score each payment's fraud risk. It's included free with Stripe accounts and catches fraudulent transactions that rule-based systems miss.

For Canadian businesses on Stripe, Radar has been trained specifically on Canadian fraud patterns and automatically adjusts to new fraud vectors.

Velocity Checks

Limit the number of transactions from the same card, IP address, email, or device in a given time period. Fraudsters often test stolen cards with multiple small transactions before making larger purchases.

Chargeback Management for Canadian Merchants

When you receive a chargeback:

  1. Don't panic — you have the right to respond
  2. Review your processor's chargeback notice — you typically have 7–14 days to respond
  3. Gather evidence: order confirmation, delivery confirmation, IP address, customer communication
  4. Submit a strong representment with all supporting documentation
  5. Keep records organized — you need evidence for every transaction

Typical chargeback win rates: 20–40% for merchants with good documentation. If your chargeback rate exceeds 1% of transactions, your processor may put you on a monitoring program or terminate your account.

Using Interac to Eliminate Chargebacks

One of the most effective fraud prevention strategies for Canadian businesses is encouraging Interac Online payments. Unlike credit cards, Interac Online transactions are irrevocable — once the customer approves the bank transfer, the merchant receives the funds and the customer cannot dispute the charge.

This eliminates chargeback fraud entirely for those transactions. For high-ticket items or businesses in high-chargeback categories, this can be transformative. Learn more about Interac Online →

Fraud Prevention Checklist for Canadian E-commerce

High-Risk Industries in Canada

Some business types face higher fraud rates and stricter processor requirements in Canada:

If you're in a high-risk category, you may need a specialized high-risk processor — these charge higher rates (2.5–4%+) but work with industries that mainstream processors decline.

Key Takeaways

  • Enable all free fraud tools: AVS, CVV, 3DS2 — they cost nothing and stop significant fraud
  • Use Stripe Radar if you're on Stripe — it's exceptional at catching Canadian fraud
  • Promote Interac Online to eliminate chargeback risk entirely for those transactions
  • Keep your chargeback rate below 0.5% to stay in good standing with processors
  • Document everything — winning a chargeback is about having better evidence