Fraud protection is mission-critical for SaaS platforms. 96.7% of organizations used at least one application that suffered a security incident.

Fraudsters exploit these vulnerabilities to inflict severe financial damage. Worldwide, the average cybercrime cost is set to reach $9.5 trillion in 2024 and $10.5 trillion by 2025.

Fraud, data damage, stolen funds, lost productivity, intellectual property and personal data theft, embezzlement, and business disruption all add up to the final figure.

To safeguard your company from SaaS fraud, lean into these eight industry-tested and actionable strategies. Doing so should enhance security posture and maintain a trustworthy and resilient platform.

Major SaaS Security Risks to Look Out For

Understanding fraud schemes can help you design targeted prevention measures and address the most pressing threats first. 

Here are the most common ones to keep an eye on:

Account takeover

Account Takeover (ATO) occurs when unauthorized individuals infiltrate and gain control over legitimate user accounts. They use stolen credentials, phishing schemes, or other technical tactics like session hijacking.

AI-enabled tools and bots amplify this threat by automating credential stuffing and carrying out large-scale attacks. Today, on average, each company experiences approximately 200,000 fake account creation attempts and 40,000 compromised accounts post-login.

Payment fraud

Stealing payment information or diverting funds from unauthorized online transactions falls under payment fraud. It targets credit cards, digital wallets, and bank accounts, exploiting weaknesses in the payment processing system. 

The more transactions and payment methods in use, the higher the risk of SaaS fraud. Experts predict losses of over $206 billion between 2021 and 2025 among a variety of industries.

Subscription fraud

Subscription fraud targets businesses that offer recurring services or products (e.g., streaming platforms, software subscriptions, or digital memberships). It costs business worldwide over $2 billion.

Attackers use stolen credit card information to subscribe to services without paying. Or, they exploit free trials with fake identities, only to churn before the trial period ends.

Chargeback fraud

Chargeback fraud is the dispute of valid transactions after receiving the product or service. Customers falsely claim the charge was unauthorized or that they didn’t receive the deliverables.

Chargebacks account only for 10% of frequency and total financial losses. Yet merchants bear the brunt of the costs—the price tag plus any chargeback fees and penalties. 

Money laundering scams

Perpetrators may use SaaS platforms to funnel dirty money into the financial system. They set up fake accounts or tamper with transaction data to make illicit funds look legitimate. This practice refers to money laundering.

In 2023 alone, money laundering scams caused $485.6 billion in projected losses worldwide. These activities finance serious crimes, including human trafficking, drug trafficking, and terrorism. 

Identify the particular fraud threats relevant to your business and ensure you’re complying with all anti-money laundering laws. With this insight, you can implement targeted strategies to bolster your defenses and maintain a secure, resilient SaaS environment.

8 SaaS Fraud Detection Strategies to Safeguard Your Business

Perform a risk assessment to map out weak points in your systems. Doing so helps you concentrate on high-risk vulnerabilities instead of spreading your efforts thin across all areas.

With that in mind, here are eight strategies to bolster your fraud detection and protection efforts.

1. Implement robust user authentication

   
   

User authentication is your primary defense against unauthorized access to sensitive customer data and proprietary systems.

However, requiring a strong password alone isn’t enough to keep intruders out. Over 50% of businesses that experience cyberattacks do so due to stolen credentials. 

Consider implementing multifactor authentication to reinforce your security barrier. MFA requires users to complete multiple verification procedures (e.g., SMS codes, authenticator apps, hardware tokens, and biometric data) before accessing sensitive information.

Note: Attackers still attempt 6,000 MFA fatigue attacks every day. Monitor authentication logs for suspicious activities and set attempt thresholds to mitigate these persistent efforts.

Authentication protocols don’t stop at implementation. Enforce password updates when necessary and train employees to avoid sharing their credentials.

2. Employ advanced fraud detection technologies

   
   

84% of all fraudsters exhibit at least one behavioral red flag. It could be an unusual transaction amount or a frequent login attempt from unfamiliar locations.

Leverage SaaS fraud detection technologies, like machine learning and AI models, to detect these sneaky threats before they escalate. They use historical and real-time data to flag patterns that might indicate fraud.

Peter Cavicchia, Chief Technology Officer at Fiserv, wrote:

“The more data that gets fed into these AI and ML algorithms, the more accurate their real-time anomaly detection will become.”

You don’t have to cross-check user activity logs and transaction details across systems. AI will alert you with easy-to-understand visual summaries to help you take action as soon as possible.

3. Secure payment processing

   
   

SaaS platforms handle a lot of billing and invoicing online. Recurring payments and customer payment information are at stake without secure payment processing.

Secure your payment gateway to prevent incidents from snowballing into increased fees and frozen accounts. To do so, Digital Payments Leader Andreas Fredrich recommended using a payment processor that supports end-to-end encryption and tokenization.

“E2EE ensures that data is encrypted from the point of entry (e.g., at the user’s device) to its destination (e.g., the payment processor). Tokenization is another option, replacing sensitive data with unique tokens.”

E2EE and tokenization offer a double layer of payment security. E2EE secures data during transmission, while tokenization turns sensitive data into gibberish that hackers can’t use.

Another best practice? Use multiple payment service providers (PSPs) to spread risk. In the event that one provider experiences downtime or a security breach, your transactions can seamlessly continue through an alternative provider. 

With Preczn, managing multiple PSPs is easy with our no-code solutions for integrating and migrating different FinTech connections. Learn more to see how we help bring all your FinTech data, services, and providers together.

4. Implement data privacy measures

   
   

Encrypted data is illegible without the decryption key, keeping your business information private from prying eyes.

Implement this measure using the Advanced Encryption Standard (AES). Governments, financial institutions, and enterprises worldwide employ this encryption method.

Cybersecurity Analyst Mehdi Gaoua noted that AES operates with key lengths of 128, 192, or 256 bits. Opt for AES-256, the most robust option, if you manage high-security applications. 

“When storing data in the cloud, ensure your service provider implements AES encryption at rest (stored data) and in transit (data being transmitted),” Gaoua also advised.

Pro-tip: Limit data collection to optimize your encryption strategy. The smaller the data volume, the lower the SaaS security risks and the simpler the encryption process.

5. Educate and train employees

   
   

63% of organizations train their staff on fraud awareness. Companies that don’t invest in training face double the financial losses compared to those that do. 

Engage stakeholders, from department heads to IT and security teams. This top-down endorsement fosters a culture of security awareness at all levels, encouraging staff to take the training seriously.

Develop training programs based on your needs, such as:

• Security best practices - basic digital security principles (e.g., password management and secure browsing)

  
  

• Phishing awareness and prevention - to avoid falling victim to scams and data breaches

  
  

• Incident response training - how to respond to security incidents, including reporting procedures and mitigation strategies

  
  

SaaS fraud training may seem like another expense line item. However, it’s often less expensive than coping with the subsequent financial and reputational damage.

6. Regular security audits and compliance

   
   

Not fixing the vulnerabilities post-breach leaves the front door open for attackers to waltz back in.

Conduct regular security audits to prevent such recurring attacks. Here’s a step-by-step guide to auditing your systems.

1. Set the scope. Identify high-risk systems and processes prone to SaaS fraud. 

   
   

2. Execute and analyze. Simulate real-world attacks on your systems to see how they withstand various threats. 

   
   

3. Run compliance checks. Verify compliance with industry standards like PCI-DSS and GDPR. They provide a structured approach to managing data security.

   
   

4. Review third-party practices. Assess your vendors’ security measures to ensure they meet your security standards.

   
   

5. Summarize your findings. Document your findings and outline any areas for improvement in a clear, actionable report.

   
   

Use insights from your current audit to refine future audit plans. Adjust the scope, focus, and methodology based on lessons learned and emerging risks.

7. Monitor and respond to fraud indicators

   
   

Predictable patterns can offer fraudsters a chance to strike. If your checks are always at set intervals, they can time their attacks to avoid detection during these routine windows.

As Mohamed El-Gabry put it for The Institute of Internal Auditors:

“[...] The absence of a surprise review of the different organizational areas—whether by the management or internal audit—may lead to enough of an opportunity to commit fraud.”

Set up real-time fraud alerts with automated responses to counter this. This way, you won’t only get notifications when your system detects anomalies (e.g., an unusually high number of sign-ups). It also automatically flags and blocks further actions. 

Hackers strive to bypass security measures. Practice proactive monitoring to stay one step ahead and keep your defenses strong.

8. Collaborate with other SaaS platforms and industry groups

In-house teams may lack the resources to invest in cutting-edge tools or participate in extensive threat intelligence gathering. 

Collaborating with external experts bridges these gaps by providing access to shared resources, up-to-date threat information, and best practices.

Join industry groups or research initiatives relevant to your niche. Platforms like Preczn, for instance, facilitate seamless information sharing among top-tier payments, lending, and treasury providers.

You can also participate in conferences like this one from the Association of Certified Fraud Examiners. Opportunities like this allow you to benchmark your practices against industry standards. 

Final Words

Fraudsters constantly change their tactics to slip past your platform’s defenses. Your SaaS fraud protection measures need to keep up, too.

Don’t wait for a breach to expose your vulnerabilities. Put these strategies into action now to protect your users and ensure you’re ready for whatever comes next.