Must-Have Fraud Prevention Tools for Modern Merchants
Defending a company against the threat of payment fraud can involve a multi-layered system of cutting-edge technology and human review processes. The best fraud prevention solutions such as Signifyd, Kount, Sift use machine learning to take thousands of points of data from each transaction in real time and preemptively flag suspicious activity before chargebacks can occur. 3D Secure 2.0 (3DS2) provides an additional layer of authentication in the case of high-risk transactions and may reduce fraudulent approvals by as much as 85%. For basic protection, use AVS and CVV verification to prove that the cardholder is who they say they are. More advanced technologies like Ethoca Alerts and Verifi Order Insight provide pre-chargeback alerts that can initiate refunds before the dispute begins. Device fingerprinting technology identifies the devices of repeat offenders using unique attributes of the devices, while velocity checks reject suspicious buying patterns (e.g., ordering multiple times in a short time span).
Implementing a Comprehensive Fraud Prevention Stack
The development of an ideal algorithm pertaining to fraud prevention can only be done by balancing security and customer experience. Start with an adequate gateway scheme, iii.e. Stripe Radar or Authorize.Net Fraud Detection Suite, which are simple, rule-filter-based. Leverage some extra AI solutions, like Forter and Riskified, for high-risk verticals, where good customers are sorted out from fraudsters through behavior analytics. Flagging the transactions through IP geolocation products, e.g. MaxMind, for known VPN or proxy servers: Chargeback guarantee programs would reimburse the cost of any approved transaction that subsequently became fraud. Finally, establish the process to manually review borderline cases like high-value purchases or mismatched shipping and billing addresses. Apart from the threshold fraud rules, keep updating them seasonally and adopting newer modes of attack to stay ahead of advanced fraudulent rings.
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