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Fraud Detection and Prevention Tools

April 4, 2022 | 13 min read

Fraud Detection

The 10 "Must-Have" Fraud Detection Tools & Best Fraud Prevention Solutions

Here’s a startling statistic: according to the Merchant Risk Council, the amount merchants spend to tackle online fraud increased five-fold between 2019 and 2021. In 2019, eCommerce merchants spent an average of 2% of their annual revenue on fraud prevention. By 2021, that share had grown to 10%.

Given the scope of the problem, how can you tell if you’re getting the most out of your fraud prevention efforts? What fraud prevention best practices should you have in place? And, what fraud prevention solutions and tools can you deploy to protect your business?

As a merchant, these are a few of the questions that can keep you up at night. Not to worry, though: in this article, we’ll answer them all.

Today, we’re looking at the top ten tools you need to have in your fraud detection toolbox. We’ll also rundown some of the top service providers to consider, and talk about the most effective way to deploy a dynamic strategy for online fraud detection.

Top 10 Tools for Fraud Detection

Remember: a fraud prevention strategy is only as good as the tools you employ to get the job done.

Fraud threats are constantly evolving and changing. Rising to meet these dynamic challenges means having multiple tools in place, all working in tandem. Think about it like a net; the finer the mesh, the more you’ll catch.

Criminals targeting your business will have their work cut out for them if you have the right fraud detection software, hardware, and monitoring tools in place. So, with that in mind, here’s our list of top ten fraud tools you need to deploy in 2022:

10. | Geolocation

Geolocation is the first fraud detection tool on our list. When a buyer submits a new order, geolocation technology pinpoints the user based on their physical location at the time of purchase. Comparing this with the information the issuer has on file lets you verify whether the buyer placed the order from a reasonable location.

The technology is not infallible, as a buyer could make purchases while traveling outside the country. However, geolocation-based fraud detection tools are helpful data nodes in the fraud scoring process. For example, a buyer in Indonesia using payment information from a US cardholder should raise a red flag.

Learn more about geolocation

9. | Proxy Piercing

Criminals can fool geolocation by using proxies to try and disguise their IP addresses. This makes it harder to flag transactions for review based on IP address or trace a fraudster’s location. One way to contend with this threat is with proxy piercing technology.

Proxy piercing is designed to see through a proxy address and identify the user’s actual location. This is a valuable tool, but it is not foolproof. Many forms of proxy piercing can be disabled if the fraudster uses specific browser extensions to block sites from running Javascript.

Learn more about proxy piercing

8. | Device Fingerprinting

Device fingerprinting is a forensic technique used to identify each purchase on the device in question. The tool gathers unique information based on the hardware and software installed on a device that visits your site. This allows you to block devices associated with bad actors in past transactions, and keep track of trusted devices.

This tool can help pinpoint suspicious activity that could suggest fraud tactics like account takeover. If an established customer accesses an account from an unfamiliar device, this should flag the transaction for closer examination.

Learn more about device fingerprinting

7. | Address Verification

The Address Verification Service, or AVS, is like geolocation in some ways. But, while geolocation tracks a user’s IP address, AVS examines the billing information attached to a transaction.

AVS compares the billing address provided by the buyer against the address on file with the card issuer. If the buyer can’t provide the correct billing address, you should consider that a red flag for fraud.

Of course, AVS still has some shortcomings. For example, a fraudster may be able to provide a valid address, while a legitimate customer could simply supply the wrong information due to a typo or lack of attentiveness. So, you still can’t base all decisoning on this one fraud detection tool.

Learn more about AVS

6. | Velocity Checks

Fraudsters understand that time is not on their side. They want to steal as much as possible in a short amount of time before their activity is discovered. So, they often attempt multiple purchases, in quick succession, for goods with a high resale value.

Fraud detection tools focused on velocity checking will monitor the data involved in each transaction. The tool watches for repeated purchases from the same user and flags them as suspicious. Having velocity checks in place can let you freeze activity if you receive a sudden batch of purchases from one user.

Learn more about velocity checks

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5. | Biometrics

Did you know you can take advantage of biometric technology, even in the eCommerce space? It’s possible with mobile payments platforms like Apple Pay and Google Pay.

These payment apps employ two-factor authentication. The user needs to use a passcode/thumbprint to unlock the device, then provide another positive ID to authorize a purchase. Plus, transactions made over mobile payments are tokenized, just like an EMV chip purchase.

Learn more about biometric payments

4. | Fraud Blacklists

Wouldn't it be great if you could create lists of buyers who are—and who aren’t—allowed to do business with you? As a matter of fact: you can.

A “blacklist” enables you to block traffic from specific users based on a variety of variables. For example, you can block all transactions from specific countries or regions known for seeing high volumes of online fraud, or those which use a specific payment method.

Conversely, a “whitelist” will block all traffic except for those outlined in the parameters of the list. If you only do business in the US and Canada, for instance, you can exclude all IP addresses based outside those territories from making purchases.

Learn more about fraud blacklists

3. | Machine Learning

With machine learning, real-time insights are fed into models based on common fraud red flags. These transactions can be rejected outright or set aside for manual review.

The more data you have, the more accurate the system’s decisioning becomes over time. The system becomes more adept at detecting fraud warning signs. That means that your systems will “learn” to detect fraud faster over time, and with greater accuracy.

Learn more about machine learning

2. | 3-D Secure

3-D Secure is a technology that works like a PIN code for online purchases. The goal is to authenticate purchasers as authorized cardholders.

A lot of merchants were resistant to using the original version of 3-D Secure. However, the more recent 3DS 2.0 and later versions address many of the original technology’s shortcomings. Many merchants now see 3DS as an indispensable tool to prevent fraud and resulting chargebacks.

Learn more about 3-D Secure

1. | Fraud Scoring

For our number one pick, we’re going with fraud scoring.

This fraud detection tool examines each transaction based on multiple fraud indicators. It then generates a composite “score” indicating the level of risk that the transaction represents.

Fraud scoring lets you engage in very simple “up-or-down” decisioning. You can reject transactions that raise too many red flags automatically, or subject them to manual review. You'll need to add dynamic rules to the process for best results, though.

Learn more about fraud scoring

Remember Best Practices

Using fraud detection tools is critically important. They won’t accomplish much if you don’t ensure you’re following best practices, though.

Take order rescreening, for example. Assume that a buyer makes a purchase, but later wants to modify the order by changing the shipping address. Fraudsters can use this loophole to disguise attacks or redirect legitimate purchases. Making modifications needs to be an easy process for customers, but you can’t ignore best practices.

All order modifications should be screened and evaluated for fraud. Most companies neglect this process since the order itself has already been screened. Rescreening, however, is an essential step in preventing post-transactional fraud.

That’s one example, but it’s far from comprehensive. You need to take the time to deploy and manage each tool in the most effective way possible. Of course, this isn’t always easy. You may sometimes need a partner to help maximize your efforts.

Finding the Right Fraud Detection Service Provider

Who you choose as a partner is important. The fraud detection platform you choose will serve as the base of your entire mitigation strategy. Any detection and revenue recovery tools you want to incorporate must be compatible with your platform as part of a comprehensive, multilayer solution.

It can be a challenge determining which fraud platform is right for you. Some service providers make incredible claims…but offer little proof of their effectiveness. So, when comparing options for service providers, start by asking yourself a few key questions:

Key Questions
Fraud Detection and Prevention Tools Can the technology be set up and deployed quickly?
Fraud Detection and Prevention Tools Can the tools be adapted to meet the specific needs of your business?
Fraud Detection and Prevention Tools How comprehensive is the data on which the solution provider relies?
Fraud Detection and Prevention Tools Can you track its effectiveness with key performance indicators (KPIs)?
Fraud Detection and Prevention Tools Can the service provider deliver observable, contextualized results?
Fraud Detection and Prevention Tools How do the service providers' prices compare to competitors?
Fraud Detection and Prevention Tools What kind of ROI can they deliver?

Top Fraud Prevention Service Providers for 2022

So, which providers of eCommerce fraud solutions will pass the test? We’ve taken the liberty of pulling together some of the top names in criminal fraud mitigation. Here’s a brief list of our recommended solution providers to help start your search (in no particular order):

Signifyd

Signifyd

Description: Signifyd's eCommerce fraud protection platform offers three key services for companies: revenue protection, abuse prevention & payment compliance. They help clients approve 5‑7% more orders on average, backed by a 100% financial guarantee against fraud and abuse.


Fraud Detection and Prevention Tools

ClearSale

Description: ClearSale’s technology sorts online orders and scores each on the level of risk it represents. Transactions flagged by the automatic process go through a manual review process to separate genuine fraud attempts from false positives.


Microsoft-Dynamics-365

Microsoft Dynamics 365

Description: Microsoft Dynamics 365 Fraud Protection helps online retailers diagnose transactions, evaluate fraud potential, and protect their business with customizable rules to obtain recommendations for eCommerce transaction decisions.


Riskified

Riskified

Description: Riskified lets merchants frictionlessly approving more legitimate transactions, while taking on fraud liability to reduce your costs. The offer a chargeback guarantee, providing accurate, real-time order decisions and scales to adapt to evolving business needs.


Fraud Detection and Prevention Tools

Forter

Description: Forter offers real-time approve or decline decisioning for every transaction. Their fully-automated process relies on machine learning, allowing for more accurate fraud identification and reduced false positives. Plus, all services are backed by a fraud chargeback guarantee.


Fraud Detection and Prevention Tools

TransUnion

Description: TransUnion works to detect and stop fraud in real-time. The service employs a combination of advanced device identification, shared device reputation, device-based authentication, and real-time risk evaluation. The goal is to leverage device-to-device associations and device history to analyze risk.


Fraud Detection and Prevention Tools

Kount

Description: Kount provides comprehensive coverage against criminal attacks originating from numerous sources. Their award-winning fraud management, identity verification, and online authentication technology empowers digital businesses, online merchants, and payment service providers around the world.


Fraud Detection and Prevention Tools

Radial

Description: Radial offers a fully-outsourced fraud solution called Fraud Zero, which combines machine learning, big data, and human oversight. The service promises higher conversions, less friction, and most notably, zero fraud liability for merchants.


Fraud Detection and Prevention Tools

Ravelin

Description: Ravelin offers real-time protection. By employing graph network analysis to identify connections across Ravelin’s network of merchants, the help stem the spread of fraud. The provider also relies on behavioral analytics and machine learning to help automate standard fraud practices.


Fraud Detection and Prevention Tools

Sift

Description: Sift offers a cloud-based platform designed to target a wide range of fraud sources. The company employs behavioral biometrics and machine learning as part of their technology, allowing merchants to view scoring for individual users and identify potential threats.


Fraud Detection and Prevention Tools

Ekata

Description: Unlike a standard fraud platform, Ekata works in tandem with other services to provide and verify data. The company employs pattern recognition, predictive analytics, and machine learning to identify threats based on more than 70 signals and patterns.


The services mentioned above are great options. Remember, though: this should only serve as the beginning of your search.

Signing on with a service provider to help with fraud detection and mitigation requires careful thought. The decision should account for the specific needs of your business based on your product vertical, clientele, and other variables.

Advanced Fraud Detection for Better Revenue Recovery

Adopting multiple different online fraud tools is the only way to fight back effectively. But, even with numerous fraud detection and fraud prevention tools at your service, there’s still no guarantee that you’re protected. You’ll still run up against two key limitations:

A tool is only as effective as your strategy allows

Having multiple tools to fight fraud won’t be enough. You need a coordinated, carefully planned strategy to make the most of the tools at your disposal.

Not all fraud is criminal

Conventional fraud detection tools have no impact on threats like friendly fraud. You’ll need additional help to deal with this and other threats to your revenue.

Here at Chargebacks911®, we specialize in preventing post-transactional fraud that criminal fraud tools like those listed above can’t reach. We work alongside other technologies to provide comprehensive, multilayered fraud defense. Continue below and get a free ROI analysis today.

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