Tips & Best Practices to Prevent New Account Fraud
Playing defense is a losing game. By the time you’ve detected new account fraud, the damage is already done, since the scammers have already infiltrated your ecosystem.
For this reason, the best way to protect your business is to stop fraudsters before they can even create an account. In this section, we’ll explore some proactive measures you can take to prevent new account fraud and secure your signup environment for the long haul.
In this guide, we’ll take a closer look at new account fraud. We’ll talk about what it is, how it works, and how prevalent it is. We’ll also provide real-life case studies and examine how you can detect and prevent your business from falling victim to account creation scams.
Of course, preventing fraudsters from creating new accounts is more effective than waiting to respond until some damage has been done. In practice, new account fraud prevention means:
Having Strong Identity Verification Measures
You should implement multi-factor authentication (MFA) at signup and checkout. In addition to a standard username and password combination, this security measure requires users to provide additional information such as biometric authentication or a one-time SMS code, before an action can be taken.
Businesses can also use Address Verification Services to determine if the billing address provided by the customer at checkout matches the address on file with the issuer. Device fingerprinting technologies, which identify a user’s device based on features such as browser’s type or IP address, can also enable you to flag fraudulent signups or transactions made using new devices.
Use Behavioral Analysis and AI-Driven Detection
Legitimate customers create a sort of digital footprint when making purchases. Behavioral analytics, which use AI and machine learning techniques to detect typical and atypical account activity, can help you flag behavior that deviates from historically normal activity.
For example, a large number of account creation attempts using similar or identical demographic information in a short period of time can signal that a fraudster, rather than a legitimate user, is attempting to sign up for a service. Similarly, multiple declined transactions may signal that a scammer is using stolen payment information at checkout.
Data Enrichment & Risk Scoring
To minimize the risk of synthetic identity fraud, you should cross-reference data provided at account opening with information from other sources, including public records and social media sites. Businesses can use these external data sources to see if the information submitted is accurate and legitimate.
Data points, such as a user’s location, age, gender, stated income and assets, billing address, IP address, and social security number, can also be used to assign risk scores to signup and transaction attempts. This can help risk teams quantify the likelihood of fraud and make data-informed decisions.
CAPTCHA & Bot Detection Tools
You can include CAPTCHA tests at the bottom of account signup and login forms to thwart bot-enabled activity. A CAPTCHA distinguishes humans from bots by asking users to identify images, relay complex patterns, decode scrambled text, or decipher audio clips. While simple, these tools are effective at stopping automated signups and preventing bad actors from creating multiple fraudulent accounts in a short amount of time.
None of these items, on their own, are enough to prove that a new account is bogus. That said, any one of these should be enough to make banks or merchants take a second look at the account and potentially ask for additional identification.
Make Sure You’re Protected
New account creation fraud can be a profitable enterprise, but fighting it alone can be a time-intensive endeavor that often offers a limited ROI. That’s why many merchants find it more profitable to partner with a full-service fraud and chargeback provider. To learn more, contact Chargebacks911® today.
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