Blockchain for Secure Digital Payments - Preventing Payment Fraud

Abstract

Digital payments have grown exponentially but face risks such as fraud, account takeover, and unauthorized transactions. This paper explores how blockchain technology, with its decentralized ledger, cryptographic integrity, and smart contracts, can secure digital payments and prevent fraud. We propose a permissioned blockchain architecture for payment systems, integrating identity management, escrow-based smart contracts, and audit-ready transaction logs. Illustrative simulations compare fraud-risk indices, transaction confirmation time, and per-transaction cost across traditional payment gateways and blockchain systems. The results indicate that blockchain can reduce fraud exposure while maintaining near real-time settlement. Challenges such as scalability, privacy, and regulatory compliance are also discussed. This study highlights blockchain?s potential as a preventive, secure mechanism for digital payments and sets the stage for future research integrating zero-knowledge proofs and federated learning.