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Velocity Checks

What are Velocity Checks? How Can You Make Them Part of Your Fraud Strategy?

When we talk about fraud, it’s important to remember that it’s not a singular, static problem with just one solution. The same goes for the tools we rely on to fight fraud: effective fraud management demands a multilayer approach with a variety of different tools. Velocity checks should be a cornerstone of your strategy.

A fraudster who submits an unauthorized transaction isn’t typically the same person who stole a cardholder’s information. Instead, fraudsters usually buy stolen cardholder information in bulk from hackers.

Many of the card numbers that fraudsters buy will be invalid. Knowing this, they typically “test” the cards by trying to run repeated transactions. If the transaction is declined, they know the card information is invalid; if it’s accepted, then they have a finite window of time in which to use the stolen information before the cardholder discovers the abuse.

If a fraudster uses your shop to test cards, or to run transactions using a working card, you’re the one who ends up footing the bill. You’ll face chargebacks once the cardholders discover the fraud, and will be responsible for the resulting fees, lost revenue, and additional costs.

This is where velocity checks come in.

What are Velocity Checks?

Velocity checks are a fraud prevention tool designed to monitor the pace at which buyers submit transactions.

Velocity Check

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Velocity checks (sometimes referred to as velocity controls) are a fraud prevention mechanism widely used by eCommerce merchants. The tool is designed to flag potential fraud based on the rate at which a buyer submits multiple transactions.

When fraudsters discover a valid card number, they’ll typically max out the card. They run repeated transactions in an attempt to get as much out of the stolen data as possible. The result: they get away with a cache of stolen information, while you get slammed with chargebacks.

Velocity checks exist to help you identify and intercept this activity. They enable you to review customer data based on a variety of factors including:

  • Email Address
  • First/Last Name
  • Device
  • IP Address
  • Billing Address
  • Shipping Address
  • Card Number

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Velocity checks are designed to scan the information submitted with each transaction and flag repeated submissions of the same information in a designated time period. This allows you to segment out suspicious transactions, identifying cases in which a fraudster might be engaged in card testing, or trying to run multiple transactions with a valid card number.

Most well-known fraud management providers will offer velocity checks as a fraud management tool.

Can Velocity Checks Flag Legitimate Buyers?

The short answer is yes; there’s the possibility that velocity checks might stop legitimate buyers from completing purchases. That said, the odds of this happening are comparatively low.

Velocity checks should operate as a cumulative indicator. You shouldn’t necessarily reject a transaction based on a single data element that happens to show up multiple times. For instance, let’s say you have multiple purchasers with the same name, or living in the same building. If you relied solely on one data element to judge whether that transaction was fraudulent, you might end up rejecting both of these legitimate buyers.

The key to making this technology work is having relevant data elements, and leveraging them properly. When you use velocity checks, there are three basic components you’re monitoring. First, there’s the individual data element, then the number of transactions in which that data element is present, and then the time frame in which those transactions are submitted.

There isn’t a clear standard for all merchants across the board that can determine whether activity should be flagged and reviewed manually for potential fraud. Instead, you should adapt the tool to flag transactions based on what makes sense for your business.

Is it common for a customer to complete several transactions within a 24 hour time frame? What about for the same customer to buy the same item several times? Do you often see multiple transactions using the same address, but different payment methods?

How you set the parameters for velocity controls will determine how effective the tools will be.

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Part of a Dynamic Strategy

Even with precision-tuned velocity checks in place, you still won’t be able to intercept every fraudulent transaction that comes your way. A single fraud prevention tool can stop some bad actors, but it won’t be able to stop every scammer. This is because fraud is a dynamic and constantly-evolving problem. Fraudsters can use a variety of different tactics and approaches to steal from you and your customers.

Does this mean you should write off velocity checks? Of course not: it simply means you shouldn’t rely solely on velocity checks as a singular fraud indicator.

In the examples we used above, we advised against using a single data element to judge whether a transaction was or wasn’t fraudulent. The same goes for individual fraud prevention tools. You should think of velocity checks as just one part of a larger fraud management strategy.

Velocity checks work best alongside other fraud prevention tools as part of a broader strategy. For instance, you should adopt:

All these fraud management tools and tactics should be examined in context by submitting each transaction to dynamic fraud scoring. This will produce a simple, data-driven figure determining the relative risk each transaction poses. You can then reject risky transactions either automatically, or on a case-by-case basis.

Velocity Controls Can’t Stop Post-Transaction Threats

While it’s important to use velocity checks and other tools to identify and prevent fraud before the sale, you need to be aware of fraud that occurs after the sale, too.

Friendly fraud is projected to represent between 60-80% of all chargebacks by 2023. Velocity checks can’t address this problem, because the fraud is post-transactional in nature. For friendly fraud, your best bet is to engage in tactical chargeback representment.

Have additional questions about chargeback management? Want to learn how you can implement velocity checks as part of your fraud management strategy? Click below and speak to one of our experts today.


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