Clean Fraud: A New and Fast-Growing Fraud Threat

Clean Fraud

Learn Why Clean Fraud is So Difficult to Detect and Prevent

After years of fast-rising eCommerce fraud losses, merchants have finally started to realize that fraud is not a singular problem with a concrete answer. However, while merchants are beginning to understand the need for dynamic, multilayer fraud prevention, fraud threats grow smarter in response.

Now, more than ever, merchants need to understand the sources of eCommerce fraud—where it comes from and how to prevent it, as well as the myths and mistakes that leave them vulnerable.

One of the fastest-growing and most dangerous challenges of eCommerce is “clean fraud.” What is clean fraud, and what can merchants do about it?


What is Clean Fraud?

Unlike other tactics like synthetic identity theft, in which criminals use stolen information to invent fake users, clean fraud leverages stolen information from actual cardholders. Criminals make purchases by accurately impersonating legitimate cardholders through the acquisition of extensive amounts of personal data (similar to account takeover fraud).

As a result, these transactions appear valid, and will not likely be picked up by fraud filters or blacklists.

Clean fraudsters are able to conduct transactions without raising red flags because they have a thorough understanding of standard fraud prevention technology.

Customers and merchants alike fear the possibility of fraud after a data breach, and with good reason. The prevalence of widespread data breaches, uneven adoption of EMV technology, and the relationship between EMV and eCommerce creates an optimal environment for clean fraud, and it is nearly impossible to detect through traditional means.

The Danger of Clean Fraud

There are four potential results for merchants attempting to identify cases of clean fraud:

  • The merchant correctly assumes the transaction is valid.
  • The merchant correctly assumes the transaction is fraudulent
  • The merchant incorrectly assumes the transaction is valid and receives a chargeback.
  • The merchant incorrectly assumes the transaction is fraudulent and loses a valid sale.

The merchant has a 50-50% chance of sustaining revenue loss, either from chargebacks and lost merchandise or from false positives that deter loyal customers.

Unfortunately, merchants will remain in a vicious loop between these two extremes if they are unaware of the distinguishing characteristics between fraudsters and legitimate customers.

Clean fraud now tops the list of fraud concerns among merchants, identified as the primary concern for 88% of merchants in a recent survey. It’s not hard to figure out why—choosing between alienating customers with overbearing fraud prevention or taking heavy losses as a result of fraud is no real choice at all. Either way, the merchant loses.

The State of Chargebacks 2018

Launched as a way of collecting and analyzing industry findings, the State of Chargebacks survey reflects the experiences of more than one thousand respondents in the card-not-present space. Download to learn the latest insights on fraud and chargeback management.

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Tips for Preventing Clean Fraud

Clean fraud is exceedingly difficult to detect. However, there are steps merchants can take to reduce their risk:

Analyze Customer Data

The best way to fight clean fraud is to capture and examine a variety of different data sources. Analyzing customer data to understand criminal behavior can produce invaluable insight into the inner workings of fraudsters, as well as shine a light on which common triggers give them away.

Merchants who pin-down the telling signs of eCommerce fraudsters in relation specifically to their businesses can separate fraud attempts from legitimate transactions much more easily.

Deter Fraud While Enticing Loyal Customers

Tracking customer data offers more than improved transaction analytics. Customer data can help reduce friction and false positives, while also deterring fraud.

Merchants should attempt to streamline the process for customers who already have a positive history with the company, encouraging a higher conversion rate among return visitors to the site.

On the other hand, adding additional fraud detection technologies for new customers can help deter fraudsters from attempting an attack.

Adopt a Multilayer, Expert-Guided Approach

Of course, merchants have a finite pool of resources they can devote to in-house fraud detection, analysis, and prevention. In many cases, merchants also do not possess the expertise necessary to effectively diagnose and prevent fraud.

Merchants need a multilayer fraud solution in order to target the myriad different fraud threat sources. Multilayer fraud detection can include fraud filters, user authentication, and chargeback mitigation, just to name a few.

Because there is so much involved in fighting fraud effectively, merchants are likely to see greater long-term benefits and a much healthier ROI by turning their fraud prevention over to experts. Services such as Chargebacks911® focus their attention on merchants’ fraud prevention needs, allowing merchants to focus their attention on growing their business.

Interested in finding out how much revenue you can retain with a multilayer fraud strategy featuring Chargebacks911’s unparalleled risk mitigation technologies? Contact us and start retaining more revenue today!

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