Fraud Prevention

  1. Resources
  2. Fraud Prevention
  3. Open Data

Open Data

Is Open Data the Secret to eCommerce Fraud Detection Success?

Is Open Data the Secret to eCommerce Fraud Detection Success?

A merchant’s revenue stream is under constant attack from criminal activity, unauthorized transactions, illegitimate chargebacks, and other threats.

Different strategies are needed to address each of these hazards, but one of the most useful tools—open data—remains largely underutilized.

Open DataWhat is Open Data?

Open data is any non-proprietary data available to be freely used and redistributed. The conditions under which this data is provided is what allow for redistribution and intermixing with other information.

Information derived from publicly-disclosed sources can be combined with other data sets to ascertain broader patterns, ultimately leading to more conclusive and authoritative findings.

Some frequently-referenced depositories of open data include the US Census Bureau and CIA World Factbook.

How Can Open Data Improve Fraud Prevention?

Open data is used for countless different purposes by millions of people around the world every day. But, how can this data help specifically address long-term fraud threats?

1. Merchants are not alone.

Data analysis is a useful process which yields valuable intelligence. However, determining where pertinent information is located and knowing how to collect it is challenging.

Many merchants assume they need to collect their own data, and if they don’t amass the information, there is no data available to analyze. Fortunately, this is an incorrect assumption.

There is an abundance of open data—relevant consumer information—that is readily available.

As long as merchants know what information can help their fraud-fighting cause, they can start asking the right questions and getting the right answers—right away!

2. Open data is always growing and improving.

By its very nature, open data is always growing and often improving in quality. The more contributions of data, the more comprehensive the resource becomes. Thus, open data is constantly growing in value and significance.

“Open source web data is valuable for fraud prevention efforts precisely because of its vast size and how it is constantly updated everyday,” said Ronen Shnidman, technology evangelist at PIPL. Shnidman’s company is a search engine based heavily on open personal data that is often used as a fraud detection tool for merchants.

“The quality and quantity of the data is improving all the time,” Shnidman explains.

3. Open data is dynamic.

The fact that open data is evolving, growing, and changing in real time makes the information dynamic—which is far more valuable than static data generated by closed-circuit platforms.

For example, AVS is not an open source solution; rather, the data AVS relies on is proprietary information owned by the card networks. If a cardholder moves and forgets to inform the bank, AVS will yield a false positive. The merchant will lose a legitimate sale and alienate the customer—all because the merchant was relying on a static solution to detect potential indicators of fraud.

When results generated by a static platform are analyzed alongside dynamic open data, merchants can reduce the risk of false positives.

4. Open data is global.

Not all data sources are universal. The relevance of a platform in regards to fraud prevention can often be limited to specific regions or localities due to differences in data infrastructure, regulatory requirements, and practices.

Again, the limited effectiveness of AVS can be used as an example to contrast the functionality of open data.

Proprietary information systems, like AVS, are limited by infrastructure constraints since the owner of the system must install purpose-built systems to enable data collection and transfer. One of the primary reasons AVS can’t scale on a global basis is because it would require the credit card rails be connected to issuing banks in other countries. This requires installation and agreements with each bank since the platform utilizes proprietary information. As a result, the owner of this system has only made an effort to connect with issuers in the US, Canada, and the UK.

This infrastructure issue doesn’t exist with open source data. For example, merchants can access VKontakte (Russia’s equivalent of Facebook) anywhere in the world with just an internet connection. This means, an American merchant can use VK account data to help verify the identity of a Russian credit cardholder without dealing with Russian banks or installing any purpose-built infrastructure. This concept is multiplied for all social networks, email address databases, phone number databases, etc. and the impact becomes quite significant.

Moreover, AVS analyzes cardholder information. However, credit and debit cards are not the preferred payment method for many global consumers, meaning the technology can’t be used to review a significant portion of purchases.

The Essential Guide to Global eCommerce

The Essential Guide to Global eCommerce

Our new whitepaper takes a close look at eCommerce practices around the world. We carefully examined data on markets from Africa to Asia and beyond, all to assemble a thorough, predictive picture of where eCommerce is headed over the next several years.


5. Open data could help dispute friendly fraud and create long-term change.

Criminals don’t usually commit crimes if they know they’ll be caught, which is precisely why illegitimate chargebacks are increasing in popularity. Many consumers perceive friendly fraud as a victimless crime, and if there is no victim, there is no one hoping to reveal the consumers’ little white lies.

Because of the way open data is collected and disclosed, consumers are often unaware of the information they’ve readily shared with the world—or how merchants can legally consult it to reveal chargeback fraud.

Access to open data enables merchants to definitively identify more cases of friendly fraud and successfully fight back. Each illegitimate chargeback that is reversed helps enhance the education of cardholder responsibility and correct faulty consumer behavior.

6. More data points means fewer false positives.

When it comes to fraud prevention, failing to detect unauthorized transactions is not usually the merchant’s primary concern. False positives are often a much more expensive issue. In fact, merchants lost $8.6 billion to false positives in 2016—which is $2.6 billion more than the actual fraud losses.

Open data may hold the answer to making fraud detection more efficient. It introduces another layer of data analysis, enhancing the manual review process by exposing assumed fraud indicators as benign threats.

Merchants may be able to better distinguish between unorthodox, yet valid, transactions and genuine fraud attacks, thereby reducing unnecessary declines, consumer frustration, and revenue loss.

7. Consulting open data doesn’t increase friction.

eCommerce is firmly locked in the Age of the Consumer—and what consumers want is convenience and efficiency. Merchants are looking for ways to maintain fraud protection without causing needless transaction friction.

Merchants can easily access open data with just the information already associated with the order—like email address, location, or phone number. Consumers won’t be forced to supply additional information and the process won’t be complicated—yet the merchant has greater intelligence, advanced consumer authentication capabilities, and reduced fraud exposure.

8. Open data complies with privacy laws.

Privacy laws dictate how merchants can collect and use personal information. These laws vary by region and often come with steep non-compliance penalties, but quite a lot of personal information is openly available and can be accessed in accordance with regulatory requirements.

According to Shnidman, “PIPL's search index is based on data that individuals have chosen to make public, which means we already meet one of the main conditions for complying with new and recent privacy legislation in Europe and several other countries.”

Not only does open data allow merchants to gather and analyze data they might not otherwise have access to, they can benefit from valuable information without fearing security non-compliance. “We should have no problem complying with new legislation because of the way our search index was built,” Shnidman added.

Are You Ready to Access Available Data?

Open data can be a valuable tool in the battle against online fraud—if merchants have the required insight and know-how to effectively leverage the information.

Even if merchants are capable of analyzing available data, the process demands significant resources, mainly time and money. This is where Chargebacks911® can help.

Chargebacks911’s proprietary technology is integrated with a multitude of intelligence sources. Our advanced data analysis capabilities produce unrivaled fraud detection and chargeback management results, meaning merchants can reap the rewards associated with open data analysis without actually exerting the effort themselves.

If you’d like to learn more about the technologically-advanced capabilities of Chargebacks911 and how they can complement your current efforts, contact us today.

Prevent Chargebacks.

Fight Fraud.

Recover Revenue.