Introduction to Carding and its Economic Importance
Carding is a type of financial fraud in which criminals use stolen bank card information (card number, CVV, expiration date, and other details) to conduct unauthorized transactions. This can occur through online purchases, cash withdrawals, or other transactions. For educational purposes, it is important to understand that carding not only harms the victims (cardholders) but also places a significant burden on the entire financial ecosystem, including banks, payment systems (e.g., Visa, Mastercard), merchants, and even consumers.According to reports, global losses from payment card fraud are growing despite improvements in security technology. For example, in 2023, global losses were estimated to be $33.83 billion, equivalent to 6.58 cents for every $100 in transactions. Forecasts point to further growth: over the next decade (2025–2035), total losses from card fraud could reach $404 billion. In the US, losses exceeded $12.5 billion in 2024, a 25% increase compared to 2023. These figures illustrate how carding affects transaction costs, forcing market participants to spend more on protection and compensation.
In this answer, we will analyze the impact of carding step by step, drawing on financial system mechanisms, statistics, and examples. This will help us understand why combating fraud is a key factor in the pricing of payment services.
Direct financial losses from carding
Direct losses are the amounts that banks and payment systems are forced to reimburse victims of fraud. When carding occurs, the cardholder can dispute the transaction (called a chargeback), and the card issuing bank typically refunds the funds. These losses are distributed among banks, merchants, and payment networks.- Global and regional trends: Global card fraud losses will rise to $33.83 billion in 2023, up from $33.45 billion in 2022. The United States bears a disproportionate share: 42.32% of global losses, but only 25.29% of total transaction volume. In eCommerce, where card fraud is particularly prevalent, average losses will be 3.0% of merchants' annual revenue in 2025, down from 3.3% in 2024 but still significant. This means that merchants lose $3 out of every $100 in revenue due to fraud.
- Fraud type breakdown: Card fraud is often associated with card-not-present (CNP) transactions (online transactions without a physical card), which account for the majority of losses. In 2024, debit cards accounted for 39% of bank fraud losses, and check fraud, 30%. In eCommerce, 3.0% of accepted orders were fraudulent in 2025.
- Impact on transaction costs: These losses directly increase costs. Banks pass on some of these losses to merchants through higher interchange fees. For example, in high-risk areas (such as online retail), fees can be 0.5–1% higher than the standard 1.5–2.5%. As a result, the overall transaction cost increases, which impacts prices for consumers.
| Year | Global losses ($ billion) | Losses in the US ($ billion) | Loss rate per $100 of transactions |
|---|---|---|---|
| 2022 | 33,45 | ~13.8 (approximately) | 6,84¢ |
| 2023 | 33,83 | 14,32 | 6,58¢ |
| 2024 (forecast) | ~34–35 (based on height) | 12,5+ | N/A |
| 2025–2035 (cumulative) | 404 | N/A | N/A |
(Data adapted from Nilson Report and other sources.)
Operating expenses for fraud prevention and processing
Carding forces banks and payment systems to invest in security systems, significantly increasing operational costs. These expenses include technology development, monitoring, and dispute processing.- Technology Investments: Banks are spending billions on AI/ML to detect suspicious transactions. By 2025, 63% of merchants plan to increase spending on fraud prevention tools, and the use of generative AI has grown to 56% (from 42% in 2024). Standards like PCI DSS (Payment Card Industry Data Security Standard) require compliance, costing large banks $5–10 million annually.
- Chargeback processing: Each disputed transaction costs $20–$100, including administrative fees. In 2025, merchants will win only 17.4% of chargeback fraud disputes. Global chargeback rates increased by 8% in 2024. For merchants, each dollar of fraud costs $4.61 in 2025 (a 37% increase from 2020), including operational costs. The cost of resolving a first-party misuse (when a customer denies their purchase) is $78 per case.
- False positives and rejection rates: Security systems will reject 5.0% of orders in 2025 due to suspected fraud, resulting in lost legitimate sales and additional verification costs. This increases transaction costs by requiring manual review (23% of orders in 2025).
- Impact on cost: These costs represent 6.5% of business revenue in 2024. Banks are raising acquiring (payment processing) fees to cover risks, making transactions 0.2–0.5% more expensive in high-risk sectors.
Fees, penalties, and regulatory aspects
Payment systems impose fines for high levels of fraud. For example, Visa and Mastercard have programs like the Visa Integrity Risk Program, where exceeding a threshold (for example, a 0.9% chargeback rate) results in fines of up to $25,000 per month.- Cost shifting: Banks increase merchant discount rates (MDRs) — the overall transaction fee. As a result, carding indirectly increases product prices: merchants add 1–2% to the cost to compensate.
- Regulations: In the EU, PSD2 requires strong customer authentication (SCA), which reduces fraud but increases processing time (by 10–20 seconds), increasing abandonment rates and operational costs.
Indirect costs and long-term effects
- Reputational losses: Frequent incidents lead to customer churn — up to 30% of fraud victims change banks.
- Legal and insurance costs: Banks face lawsuits (e.g., class actions) and pay more for cyber insurance (premiums are increasing by 20-30% annually).
- Economic Multiplier: Every dollar lost from fraud generates $4–5 in additional costs in the ecosystem.
Case studies
- Target breach (2013): 40 million cards were stolen, resulting in $200 million in losses, plus reputational damage. This led to stricter standards and higher fees.
- Modern eCommerce: In 2025, merchants with the MRC (Merchant Risk Council) have fraud rates of 0.4% versus 3.4% for others, demonstrating the value of investment.