The subscription economy has fundamentally reshaped the health and wellness industry. From vitamins and supplements to fitness apps and telehealth programs, recurring billing models offer predictable revenue and improve customer retention. But the same systems that make subscriptions attractive to businesses can also open the door to fraud. Subscription fraud undermines profit margins, increases chargeback rates, and puts merchant accounts at risk of termination. For companies relying on recurring payments, especially in the sensitive health and wellness vertical, proactive fraud prevention is essential—not optional. To build a sustainable subscription business, merchants must combine operational discipline with advanced merchant account processing safeguards to protect both their revenue and their customers.
Why Health & Wellness Subscriptions Are Prime Fraud Targets
Fraudsters are drawn to subscription-based models because they offer ongoing value with minimal upfront friction. In health and wellness, this is even more appealing because of the high resale value of supplements, services, and digital goods. Fraudsters often use stolen credit cards or false identities to gain access to these products for free or at scale. Additionally, trial abuse is rampant, where users exploit introductory offers by creating multiple accounts with fake details. This behavior not only leads to lost revenue, but also strains fulfillment and customer support teams. The health and wellness industry, with its rapid growth and broad consumer base, presents a lucrative target for subscription fraud unless businesses take action[1].
The Real Cost of Subscription Fraud for Health Brands
Subscription fraud is more than a payment issue—it’s a systemic threat to brand credibility and operational continuity. When chargeback ratios spike, payment processors classify the business as high-risk, which leads to higher processing fees, reserve requirements, or account closure. Repeated fraud can also damage your standing with card networks, potentially blacklisting your brand from future processing opportunities. More subtly, it corrodes trust with legitimate customers who may experience declined payments, delayed shipments, or confusing billing scenarios due to your anti-fraud measures. The cost of fraud isn’t just in dollars—it’s in damaged relationships, lost future sales, and missed growth milestones. Health and wellness brands that don’t prioritize fraud prevention end up paying for it in ways that compound over time[2].
Free Trial Exploitation
Fraudsters often use temporary emails and disposable phone numbers to repeatedly activate free trials. They create multiple fake accounts to avoid paying for the service while continuing to receive physical goods or digital access. This activity increases fulfillment costs, skews customer analytics, and inflates acquisition metrics. Over time, trial abuse can distort lifetime value data and lead to false conclusions about product-market fit. Since many businesses ship products automatically after a free trial, these fraudsters receive tangible goods with no intention of converting. Eventually, this leads to higher chargebacks, customer complaints, and inventory losses.
Use of Stolen Credit Cards
Card testing is a major risk for subscription sites, especially those with recurring billing. Fraudsters use bots to attempt dozens or hundreds of small transactions to identify valid card details. Once confirmed, they enroll in subscription plans to receive valuable wellness goods with no cost to themselves. These stolen transactions not only lead to chargebacks but also to merchant account reviews or sudden shutdowns. Sites that don’t enforce fraud filters or verification steps are particularly vulnerable to these attacks. In some cases, merchants are liable for refunding not just the transaction amount, but also the value of shipped products.
Friendly Fraud Through Chargebacks
Some customers initiate chargebacks even after legitimately subscribing, claiming they never received the product or didn’t authorize the payment. This type of first-party fraud is difficult to win without strong documentation. Wellness brands are especially prone to friendly fraud because products like supplements or coaching sessions are hard to quantify or return. If a customer claims dissatisfaction, they can often reverse charges without returning anything. This behavior trains processors to see the business as high-risk, even when the merchant did everything right. Ultimately, friendly fraud is a trust issue, and repeat offenders can exploit lenient refund policies.
Synthetic Identity Abuse
Fraudsters use a blend of real and fake information to create seemingly legitimate identities. These accounts pass basic verification but are created for the sole purpose of extracting goods or services. In health and wellness, they often target high-value programs like coaching, supplements, or wellness plans that renew monthly. Once the first payment fails or the identity is flagged, they move on to a new alias. Because synthetic fraud is harder to detect than stolen card use, many merchants underestimate its impact. It’s especially dangerous for subscription businesses with long renewal cycles and delayed billing.
Building the Right Fraud Prevention Infrastructure
AVS and CVV Enforcement
Address Verification Systems (AVS) and CVV requirements are essential to reducing fraud. AVS ensures that the billing address matches the cardholder’s, while CVV adds another authentication layer. Together, they act as a frontline filter against stolen cards and automated bot testing. These simple checks create enough friction to stop low-effort fraud without significantly disrupting the user experience. Most processors offer AVS and CVV matching tools, but merchants need to configure them correctly to avoid unnecessary declines. Proper implementation reduces chargebacks and improves your processor’s trust in your risk profile.
IP and Device Fingerprinting
Tracking user devices and IP addresses can reveal patterns that human reviewers might miss. Fraudsters frequently use VPNs, emulators, or virtual machines to mask their activity. Device fingerprinting allows merchants to spot when multiple accounts originate from the same setup, even if emails or names differ. This is crucial for identifying repeat trial abuse or bot-generated signups. Coupled with geolocation data, fingerprinting helps enforce region-based restrictions and spot high-risk access points. Over time, these tools provide behavioral insights that strengthen predictive fraud detection.
Email and Phone Verification
Requiring customers to verify both email and phone numbers helps filter out low-quality or fraudulent accounts. Disposable email services and burner phone numbers are common tools for fraud rings trying to exploit trial offers. Verification steps increase signup friction for bad actors while giving legitimate users confidence in your platform. Multi-step verification also makes it easier to communicate with real customers if disputes arise. For subscription services, confirmed contact details are often critical for winning chargeback disputes. Investing in real-time verification APIs can reduce fraud significantly without adding operational overhead.
Billing Agreements
Many chargeback disputes hinge on whether the customer agreed to recurring charges. By presenting a billing agreement checkbox at checkout—and storing the timestamp and IP address—merchants gain powerful evidence. This documentation can be submitted during chargeback responses to prove user consent. It also signals transparency to the customer, reducing complaints about unexpected renewals. Clear communication about billing terms at the moment of purchase builds trust and compliance. Timestamped agreements are a low-cost, high-impact fraud prevention asset.
AI Fraud Scoring for New Subscribers
Machine learning can analyze dozens of factors in real time to assign a fraud score to new customers. These models consider behavior patterns like typing speed, referral source, device history, and more. Scores above a certain threshold can trigger manual review, block access, or require additional verification. Unlike static filters, AI systems adapt over time and get better at detecting subtle fraud signals. Merchants who use fraud scoring can reduce false positives while catching more sophisticated fraud attempts. For health and wellness brands scaling fast, this automation is essential to protecting recurring revenue.
Real-Time Chargeback Monitoring
Some platforms offer alerts when a chargeback is filed, giving merchants a short window to resolve the issue or refund proactively. This preemptive approach can reduce dispute volume and improve win rates. It also allows customer service teams to step in and clarify confusion before the situation escalates. Real-time monitoring tools sync with your CRM, payment gateway, or processor dashboard to flag high-risk transactions early. They also provide metrics on dispute trends, enabling smarter policy changes. Chargeback monitoring is not just defensive—it’s a strategic advantage for subscription businesses.
Using Subscription Analytics to Strengthen Fraud Defenses
Data is the key to understanding—and combating—fraud in real time. Subscription services generate rich behavioral data that, when analyzed properly, can highlight risks before they materialize. Health and wellness businesses should monitor patterns like trial conversions, churn points, refund timing, and login consistency[3]. By turning these metrics into alerts or scoring factors, companies can tighten fraud controls without disrupting legitimate users. Analytics also help refine pricing strategies, campaign targeting, and product bundling to avoid attracting abusers. Fraud prevention becomes significantly more effective when it’s backed by dynamic, data-driven decision-making.
Strengthen Fraud Defenses Using Subscription Analytics
Tracking Repeat Refund Requests by Account
Customers who consistently request refunds across multiple billing cycles may be exploiting policies. Identifying them allows your team to apply stricter controls or block them altogether. High-frequency refunders can also skew performance metrics, making campaigns appear less effective. Segmenting these users separately helps protect your reputation with payment processors. Long-term, it builds cleaner, more reliable performance data for strategic planning. Setting a policy for maximum refund requests allowed per account is a useful guardrail.
Analyzing Trial-to-Paid Conversion Timelines
Legitimate users tend to convert in predictable patterns based on industry norms. Sharp deviations—like mass cancellations right before renewal—can indicate exploitation. By analyzing these cycles by segment or campaign, you can pinpoint sources of fraud-prone traffic. This insight helps you adjust ad spend and refine targeting. It also allows you to experiment with trial lengths and renewal incentives to balance risk and retention. Clean data builds a stronger subscription model and a healthier business.
Cross-Referencing Payment Methods and Device History
When the same device is used with multiple cards, names, or accounts, it's a red flag. Even if the data points are slightly different, device ID and session fingerprinting expose abuse. This tactic is especially useful for detecting synthetic fraud and affiliate fraud. You can create automated blocks or flags when suspicious cross-use occurs. This makes it harder for fraudsters to repeatedly game your system. Layered with payment method monitoring, this method builds a formidable defense.
Flagging Abnormal Login and Checkout Behavior
Bot-generated signups often exhibit different behavior than real users—such as rapid page scrolling, identical keystrokes, or zero hesitation. Logging this data allows you to flag and isolate users whose behavior falls outside normal ranges. This can also catch users accessing your platform from scripts or automation tools. Patterns like zero time on checkout screens or immediate trial activation with no browsing are often overlooked. Behavioral analytics tools can capture and score these actions in real time. It’s like a fingerprint of intent, helping you stop fraud at the first touchpoint.
Segmenting Chargeback Sources by Marketing Channel
If chargebacks spike after a particular campaign or affiliate promo, it’s likely you're attracting low-quality or deceptive traffic. Marketers and fraud teams should share data to understand where abuse is coming from. Segmented reporting helps optimize campaign approvals and blocklist harmful traffic. The goal isn’t to stop advertising—it’s to advertise smarter. This kind of analysis improves ROI and protects your merchant account reputation. It also helps negotiate better terms with traffic sources and platform partners.
Automating Risk Flags Based on Combined Criteria
One behavior may not be suspicious on its own, but multiple risk signals in combination usually are. A user accessing from a proxy, using a burner email, and requesting a refund within 48 hours should be automatically flagged. Combining device data, user actions, and payment patterns enables smarter workflows. With the right automation tools, your fraud team can act faster and more effectively. These rules should evolve with new threats and campaign types. Data-driven automation keeps your fraud strategy one step ahead.
Merchant Account Tools Designed for Subscription Defense
The strength of your fraud strategy also depends on your processing partner. Many secure merchant services providers now offer built-in tools for subscription fraud detection. These include advanced gateway rules, dispute resolution portals, and performance-based risk scoring. The best processors help health and wellness brands configure fraud rules at the API level, minimizing false declines while preventing abuse. As fraudsters get smarter, so must your merchant account tools. Choosing a provider with industry-specific fraud solutions gives your business long-term security and flexibility[4].
Custom Decline Logic Based on Risk Profiles
Modern merchant accounts allow businesses to reject or flag transactions based on custom fraud signals. For example, if a payment has a mismatched ZIP code and a disposable email, it can be declined in real time. This customization keeps fraud out while preserving legitimate sales. Advanced gateways make these filters easy to adjust by campaign or product. Custom rules help reduce chargebacks without relying solely on third-party fraud platforms. They also speed up fraud response time and improve your approval rates.
Dynamic Reserve Adjustments Based on Risk History
Processors that specialize in subscription businesses often offer flexible reserve models. If you maintain a strong track record, they may reduce or release reserves sooner. This helps your cash flow and rewards consistent fraud prevention. Static reserves are often a sign of mistrust or inexperience on the provider’s part. Ask for dynamic, data-driven reserve policies when choosing a partner. It’s a sign that the processor is confident in your risk controls and wants a long-term relationship.
Real-Time Dispute Resolution Interfaces
Top-tier processors provide dashboards where merchants can respond to chargebacks immediately. These interfaces reduce the need for lengthy back-and-forth emails or support tickets. The faster you respond, the higher your chances of winning the dispute. Some systems even integrate with your CRM to auto-populate transaction data. For recurring billing, speed and evidence matter. These tools give you the best chance of preserving revenue and maintaining processor trust.
Subscription-Specific Fraud Filters
Some processors offer fraud filters specifically designed for recurring billing models. These include recurring card validation, retry logic monitoring, and churn-risk scoring. These filters catch patterns unique to subscription fraud that generic systems may miss. They also reduce friction for good users by allowing more contextual rule application. Look for processors who understand subscription flows, not just one-time sales. Their insights will help future-proof your payment system.
API Access for Real-Time Risk Response
Open APIs allow your fraud tools to communicate directly with your payment processor. This reduces lag and enables instant response to emerging threats. You can block transactions, reroute payments, or apply hold statuses without manual intervention. Fast integration is key for scaling fraud prevention. Choose processors who make their systems accessible, not walled off. Open platforms create a stronger fraud ecosystem.
Support from Subscription-Focused Risk Teams
The best processors provide human support—not just automation. A risk team that understands subscription businesses can help tune your settings, interpret trends, and prevent account shutdowns. They act as advisors, not just gatekeepers. This partnership improves your fraud prevention and your long-term growth. When issues arise, a knowledgeable support team can make the difference between recovery and chaos. Choose a partner who treats your business like theirs.
Conclusion
Health and wellness businesses thrive on recurring revenue—but subscription fraud can drain it just as quickly. From free trial abuse to synthetic identity scams, bad actors are constantly evolving their tactics. Without proactive fraud prevention built into your subscription services, you risk losing not only money, but also your merchant account and brand trust[5]. The key is combining smart tools, clear policies, and expert merchant account processing partners who understand your space. With the right systems, you can keep fraud under control while improving the customer experience.
At Payment Nerds, we help health and wellness brands design subscription infrastructures that scale securely. From fraud detection to recurring credit card processing, our solutions are built to reduce risk and support long-term business success.
Sources
- Forbes. “How Subscription Brands Are Fighting Fraud in 2025.” Accessed April 2025.
- Visa. “Merchant Risk Toolkit for Recurring Payments.” Accessed April 2025.
- Bankrate. “Preventing Friendly Fraud in Health & Wellness Ecommerce.” Accessed April 2025.
- PCI Security Standards Council. “Subscription Services and Payment Compliance.” Accessed April 2025.
- McKinsey & Company. “The Evolution of Recurring Payment Fraud.” Accessed April 2025.
