Payment Service Providers (PSPs) are losing merchants faster than fraudsters are stealing money — and not because of fraud itself, but because of how they try to stop it.
In recent years, a growing number of merchants have reconsidered or replaced their PSPs due to issues such as strict fraud filters, poor approval rates, and unnecessary friction at checkout. At the same time, false declines have become a major source of revenue loss across eCommerce — in many industries, they now rival or even exceed the direct cost of fraud.
In fact, 58% of retailers say their current payment technology directly causes lost sales and higher cart abandonment — which often pushes them to look for alternatives.
For a PSP, every false decline is a double loss: missed transaction revenue and a gradual erosion of the merchant’s trust. Once legitimate customers begin to be blocked, merchants typically start looking for alternatives.
The truth is: PSPs don’t lose merchants to competitors. They lose them to bad customer experiences.
Fraud is costly for merchants, but it also directly impacts PSPs:
- Financial liability: excessive chargebacks damage relationships with card schemes and acquirers.
- Merchant churn: if fraud tools reject too many good transactions, merchants lose revenue and may switch providers.
- Reputation risk: PSPs seen as “too risky” or “too strict” struggle to win new business.
Traditional fraud tools often force PSPs into a binary choice:
- Approve quickly and risk higher chargebacks.
- Or tighten filters and risk declining legitimate customers.
Neither option is sustainable.
FUGU introduces a multi-tier, post-payment approach that allows PSPs to go beyond this binary decision. Instead of relying only on signals captured at the moment of checkout, FUGU continues to evaluate transactions until fulfillment:
- Initial profiling at order creation: device fingerprinting, session data, IP, and behavioral cues.
- Post-payment monitoring: tracking address changes, email engagement, support interactions, and KYC responses.
- Pre-shipment scoring: reassessing risk right before the goods are shipped.
- Chargeback management: compiling the full customer interaction trail as ready-to-use evidence.
For PSPs, this means they can authorize more transactions at checkout while still having mechanisms to stop fraud before it becomes a loss.
Why PSPs Should Lead in Fraud Prevention
These skills turn data into decisions that make sense.
Without them, fraud systems risk becoming black boxes — fast, precise, and opaque.
How FUGU Turns Insight into Intelligence
- Higher merchant approval rates
PSPs equipped with continuous monitoring can approve more legitimate transactions, directly boosting merchant revenue. This becomes a key selling point in merchant acquisition and retention. - Reduced operational costs
By automating evidence collection and reducing manual reviews, PSPs cut down on fraud management overheads — savings they can pass on to merchants. - Competitive differentiation
In a crowded market, offering post-payment fraud protection positions a PSP as innovative and merchant-centric, not just another processor. - Stronger ecosystem relationships
Fewer chargebacks improve standing with acquirers and card networks, unlocking better terms and higher transaction volumes.
Case Example: Turning Risk Into Retention
Imagine a merchant selling high-value electronics through a PSP. Traditional systems might block 10–15% of transactions flagged as risky at checkout. Among those, many are legitimate customers — lost revenue for the merchant and frustration that may lead them to question their PSP’s value.
With FUGU integrated, those transactions are approved initially, then monitored closely post-payment. Risky customers may be prompted with an additional verification step before shipment. Fraudulent ones are stopped in time. Legitimate ones go through without unnecessary friction.
- The merchant sees higher approval rates.
- The PSP demonstrates tangible value.
- The partnership grows stronger instead of strained.
From Gatekeeper to Growth Enabler
The future of fraud prevention isn’t about saying “no” more often. It’s about saying “yes” more intelligently. PSPs that adopt post-payment monitoring shift from being perceived as gatekeepers to becoming growth enablers.
Merchants don’t want a PSP that only processes transactions. They want a partner who helps them accept more business, protect revenue, and earn customer trust.
Conclusion
Fraud prevention is no longer a back-office function — it’s a core differentiator for PSPs in today’s digital economy. By embracing continuous, post-payment risk analysis, PSPs can offer merchants exactly what they need: higher approval rates, fewer losses, and frictionless customer journeys.
FUGU provides the tools to make this possible. Because for PSPs and merchants alike, every payment counts.