Online Fraud Detection

April 22, 2021 | 9 min read

Online Fraud Detection

What’s the Best Online Fraud Detection Approach for Merchants?

Fraud is a serious problem in the eCommerce space. Online fraud detection is a critical process if you’re going to retain revenue, protect your reputation, and keep your business in good standing.

Of course, you already know all that. After all…that’s why you’re reading this. So, if you already understand the importance of fraud management, the next question is: how do you get started?

Different Threats Call for Different Responses

When it comes to running an online business, there are many components that you can basically “set and forget.” Fraud detection is not one of those components, though.

You might already be using some tools or strategies to detect fraud. There are dozens of different options to choose from, including CVV verification, address verification, and geolocation, just to name a few. Unfortunately, bad actors also have a wide variety of tools and tactics at their disposal. They have plenty of ways to separate you from your hard-earned cash, even with these tools in place.

Some of the methods commonly used by fraudsters include:

Account Takeover

Account Takeover

a fraudster impersonates a legitimate user by hacking their account and completing an invalid transaction.

Clean Fraud

Clean Fraud

a fraudster uses stolen credit card data to make a purchase, then manipulates the transaction so as to bypass fraud detection devices.

Fast Fraud

Fast Fraud

a fraudster runs stolen cardholder information, maxing out valid cards and disappearing as quickly as possible.

Synthetic Fraud

Synthetic Fraud

a fraudster uses stolen information to create fake identities and apply for credit cards, then goes on a shopping spree before detection.

Affiliate fraud

Affiliate fraud

a fraudster enrolls as a performance marketer, then uses stolen card information to submit transactions and claim unearned commissions.

Business Email Compromise (BEC)

Business Email Compromise (BEC)

a fraudster impersonates a person within your company to steal sensitive data, like business credit card information.

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Keep in mind that the above is not an exhaustive list. Criminals come up with new tactics every day, and each fraud tactic has a different point of attack. A BEC scheme, for example, might target your internal email system through phishing…while an account takeover attack might also employ phishing, but use it to target customer accounts. One single tool—or a network of disconnected tools that work alongside one another but not together—can’t address every threat source.

Should You Seek Outside Help?

So, we’ve established that one or two online fraud detection tools won’t cut it on their own. What should you do now?

One option is to consider building out your own internal fraud management strategy. This approach has some advantages; for instance, no one has a more intimate understanding of your business than you do. You may also be able to react faster to situational changes while keeping costs relatively low.

However, relying only on in-house online fraud detection presents several weak points, too. While you might pay less upfront, you probably won’t recover as much revenue because your strategy lacks cost efficiency. You also may not receive the kind of valuable reporting you’d get from a third-party provider, nor will you benefit from intelligence gained through broad, comprehensive data analysis.

Creating and sustaining a profitable in-house fraud strategy is very difficult. In the end, you’re still unlikely to see a full picture. You won’t have the data insight necessary to track your success at fighting fraud or to determine whether you’re seeing worthwhile ROI.

Build & Buy: The Best Approach

Partnering with the right third-party solution can deliver direct profitability. It can also offer improved merchant-issuer relationships, increased customer satisfaction, less need for manual reviews, and fewer false positives.

That’s not to say you shouldn’t bother with in-house fraud management, though. In fact, the opposite is true: at Chargebacks911, we advise that you take a “build and buy” approach to fraud.

A hybrid strategy, built on a close working relationship between your internal team and a third-party service provider, offers you the best of both worlds. You have intimate operational knowledge offered by your internal team. At the same time, you have access to the expansive data and expertise that a professional online fraud detection service brings to the table.

Remember, though: an off-the-rack, “cookie-cutter” solution is not what you need. No two businesses have the same risk, so a one-size-fits-all, automated solution will ultimately be ineffective. With that in mind, here are a few points to consider when looking for the right service provider for your needs:

  • What are the guarantees? And what are those guarantees based on?
  • If the price is based on transaction volume, can you analyze future growth potential well enough to budget accordingly?
  • Are there client testimonials? Are you able to speak with current customers?
  • Is the vendor adaptable and agile enough to support future technology and fraud developments? Can they grow with your company?
  • Do they have prior experience with merchants in your vertical? Partners who understand merchant experiences will be more effective at minimizing risk without compromising growth.
  • Do they specialize in certain product verticals?

Get Help With Online Fraud Detection

Who you should turn to for outsourced solutions depends on the specific areas where you need help. This list is in no way exhaustive, but it showcases a few of the most reputable vendors and their specialties:

Microsoft Dynamics 365 is Microsoft's proprietary fraud prevention platform. The service defends against fake account creation and account takeover, and also helps improve transaction acceptance rates, prevent loss, and more.
Kount’s patented digital fraud prevention solution means fewer chargebacks and declines, plus lower operational costs. It’s used by some of the world’s largest payment service providers, gateways, processors, and acquirers.
Bolt is a one-click checkout platform with a multilayered approach consisting of machine learning, rules, and manual reviews for in-house risk management—all backed by a 100% fraud chargeback guarantee.
Riskified uses machine learning to instantly differentiate between good and bad actors, allowing merchants to approve more orders (with a 100% chargeback guarantee) while providing a frictionless customer experience. is the only cloud-based “glass-box” system, as well as the leading fraud prevention platform for the financial services and digital commerce sectors. Their algorithmic analytics detect fraud in real-time, at scale.
Signifyd offers fraud protection for eCommerce backed by a 100% financial guarantee. Their technology identifies both good and bad consumer behaviors—reducing losses, lowering rejections, and increasing revenue.
Over 34,000 sites and apps—from digital disruptors to Fortune 500 companies—trust Sift to deliver prime customer experiences while preventing fraud and abuse. Their scalable solution uniquely updates risk scores in real-time.
LimeLight believes that if merchants can better identify fraudulent transactions, they can eliminate buyers who aren’t bringing value. By focusing on real, long-term customers, they can help reduce the burden of chargebacks.
Simility combines the best of human analysis and machine learning in their approach to fraud protection. This adaptive fraud detection learns and evolves, preventing fraud in real-time and helping merchants grow.
Ravelin provides technology and support to help merchants prevent evolving fraud threats and allow them to accept payments with confidence. They offer machine learning, access to a global fraud network, and more.
Iovation reduces cyber fraud through strict device identification and risk reporting. The company helps merchants keep apps and websites secure by identifying suspicious devices the moment they try to connect.

Optimize Your Online Fraud Detection With Chargebacks911®

No matter where you need help, Chargebacks911 should be an integral part of any multilayer fraud management system. Our solutions increase revenue retention, make fraud detection and chargeback mitigation tasks more efficient, and allow our clients to reallocate resources to revenue-generating departments.

We work closely with in-house management teams to create a customized integration, along with the most comprehensive, transparent, end-to-end outsourcing option available. And, of course, this is all backed by the industry’s only performance-based ROI guarantee.

Contact us today to learn more about our solutions and how Chargebacks911 can help optimize your online fraud detection efforts.


How do I detect online fraud?

There are numerous tools you can use to detect online fraud, including CVV verification, address verification, and geolocation, just to name a few. However, fraud detection should be based on the tactic employed and should involve a number of complementary indicators.

Should I outsource my fraud detection?

The best approach is to augment in-house efforts with third-party support. Merchants can leverage their intimate knowledge of their business operations but still benefit from the fraud prevention expertise offered by third-party solution providers.

How Do I find the right fraud solution for my needs?

Your decision should be based on a number of factors including the guarantees offered by a solution provider, as well as the price and the experience they bring to the table. Adaptability is also another important point to consider.

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