Guest Blog by Frank Stornello
Since online fraud threatens the profitability of merchants, especially those that depend on card-not-present (CNP) revenues, it’s essential to use all your cross-channel data insights and intelligence wherever possible to deter it. It’s not just the fraud losses you need to avoid; it’s the associated expenses. According to the 2013 Lexis Nexis True Cost of Fraud Study, each dollar of fraudulent activity steals $3.10 from the bottom line of online-merchants.
There are, however, highly effective solutions you can put in place that give you the upper hand in fighting fraudsters and the specific threats and loop-holes they seek to exploit. Take these four steps to build your defenses and prevent criminals from sabotaging your bottom line.
1. Check IP Addresses for Suspicious Activity
Having access to IP addresses can help you determine the approximate location of a device, such as a laptop or smart phone. Analyze your transaction data and look for trends in IP addresses. For instance, consider the following:
- Do you experience more fraudulent activity when IP locations are more than 500 miles from billing addresses?
- Create user profiles and determine if customers have changed their buying patterns. Perhaps a customer suddenly starts buying higher priced items or substantially increasing his or her shopping activity.
- Is an account being accessed from multiple locations or from locations where fraud is prevalent and in a time period in which it would not possible for someone to get from one place to the next?
There is a wealth of information available in IP addresses, and once you analyze it, you can set up rules that automatically decline transactions you believe might be fraudulent, or flag them for additional manual processing.
2. Detect Devices with History of Fraud
You can access digital fingerprints which are based on the actual transaction history and gives you a better understanding of the risk of a variety of devices used for online shopping transactions, such as personal computers, laptops, tablets and smartphones. Digital fingerprinting enables you to identify the fraudsters hiding behind the web’s wall of anonymity and block the devices with a history of fraudulent activity.
For example, If a fraudster network gets a hold of credit card data, you likely will see find a high velocity of transactions as the fraudster tries to beat the clock and use card information before anyone knows it has been compromised. Digital fingerprinting can detect velocity on a device and alert you to the problem so you can prevent fraudulent purchases and ensure criminals don’t eat up your profits.
3. Determine the Locations of Mobile Phones
There are billions of mobile devices moving around the planet. Do you know the locations of the people who are using mobile devices to purchase from your company? Since mobile phones’ have several ways to obtain location including cell-tower triangulation there’s always a way to determine the approximate position of the phone.
This data enables your company set rules to comply with state and federal regulations as well as the brand protection guidelines of major credit card companies. Since, for example, the purchase of certain products isn’t legal in all states, a merchant must ensure it doesn’t accept transactions from areas where it’s illegal to make a purchase.
Another use for mobile phone location information is helping to enforce media blackouts that are established to encourage local people to attend sporting events in person.
Finally, location data can be helpful in determining if a mobile phone is being used outside of its usual geographic area. If, for example, Grandma Jones usually makes all her transactions within ten miles of her hometown in Vermont and is suddenly found on a spending spree in Brazil, it might be cause for questioning and blocking purchases from her phone.
4. Identify Consumers
You don’t want to do business with the wrong people, but how do you know who they are when you’re not face-to-face? With the right information at your fingertips, you can confirm a customer’s identity with just a name and address. You can confirm the address provided matches the identity or determine their age and, if necessary, avoid selling to minors. And, you can find out if a consumer is a member of a global watch-list, such as the Office of Foreign Assets Control (OFAC), the agency that administers trade sanctions against foreign countries, as well as individuals and organizations.
The Right Information, the Right Insights
It is important to take stock in what your available data and channel information is telling you to enact the most comprehensive and effective fraud prevention protocols. It takes time and expertise to build a risk management system and keep up with the shrewd new schemes fraudsters devise every day. That’s why many companies turn to Verifi to ensure they mitigate fraud successfully.
Frank Stornello is Chief Marketing and Strategy Officer of Verifi, a leading provider of global electronic payment and risk management solutions since 2005.