Running Insight Live Podcast: Running Retail Fraud with Leah Langston

In Running Insight’s latest podcast episode, our very own Senior Product Marketing Manager Leah Langston talks about running retail fraud and online customer experience.

Running Insight Live Podcast: Season Two, Episode Two

The Running Insight

Did you know athletic footwear is one of the top retail categories for online fraud? Leah shares why that it is and what stores can do to prevent it, while at the same time ensuring customers have an excellent, secure online buying experience.

Listen to the episode here.

How to Capture More Revenue this Holiday Season

Receiving an order with a request for delivery to a “freight forwarder” or “reshipper” can make even the most experienced eCommerce merchant wary.

For many online sellers, a freight forwarder is associated with fraud—often, it’s assumed to be a fake address used by scammers—and for good reason.

In this blog post, we’re breaking down how to safely do business with customers that use freight forwarders, what you can do to identify fraud and fight chargebacks, and how NoFraud’s fraud prevention service can help protect you.

What is a Freight Forwarder?

A freight forwarder, or reshipper, is a business that receives packages and reships them to a secondary destination. Many freight forwarders are international shippers, accepting packages from businesses in one country and sending them to customers in another country.

Here’s an example of how it works: a customer places an order through your site and puts in the freight forwarder’s address as their shipping address. You accept payment from the customer and ship their order to the freight forwarder, and the freight forwarder loads it onto a shipping container and reships it to your customer.

Detecting Freight Forwarders with Shipping Addresses

Many people often ask how you can tell if an order’s shipping address belongs to a freight forwarder?

An order shipped to a freight forwarder often contains a string of numbers and letters in the address field (for example, 321 Harbor Road Suite 303 #XYZ-56784567). The freight forwarder uses this number to keep track of which packages belong to which customer or which shipping container they need to be repacked into.

If you look up the address on Google Maps, a freight forwarder will typically appear as a storefront or warehouse. Because they often ship internationally, most freight forwarders are located at a country’s border, and many are near large coastal shipping ports.

  • Examples of popular locations for freight forwarders include
    – Wilmington, Delaware
    – Portland, Oregon
    – Miami, Florida

There are publicly available lists of registered freight forwarding companies, so you can always research a shipping address and see if it comes up as a reshipper.

Why are Orders Sent to Freight Forwarders Considered High Risk?

Many scammers use freight forwarders to disguise their fraudulent orders as valid ones. While shipping a package to Nigeria may raise some eyebrows, shipping a package to Doral, Florida is more likely to go unnoticed by a merchant’s fraud detection system.

By hiding behind a reshipper’s address, these scammers hope to sneak past your defenses.

Using a freight forwarder’s address also protects the fraudster’s identity, as they can receive an item without revealing their true location. This is especially helpful for those who place orders using stolen credit card information.

How Freight Forwarder Scams Work

Scammers have figured out several ways to cheat merchants through reshipping fraud, also called delivery address fraud.

  • 3 Common Reshipping Schemes:
    – Fake Address, Fake Payment Scam
    – Fraud Mule Scam
    – The Shipping Costs Scam

The Fake Address, Fake Payment Scam

The scammer places an order for delivery to a real reshipping company but pays with stolen or falsified information. By the time you’ve gotten a declined payment bank notification and a chargeback fee, the scammer has already received his order from the reshipper. It’s difficult to track him down because you don’t have his real billing or shipping information.

The Fraud Mule Scam

Perhaps the most infamous form of reshipping fraud is when the fraud mule scam takes advantage of innocent third parties. Scammers recruit people looking for legitimate work-from-home jobs as gift wrappers or shipping inspectors. The scammer places orders through your site (usually with stolen credit cards) and ships the packages to the clueless “gift wrappers.” They reship the items to the scammer, who takes possession of the goods without ever giving the merchant his real location or identity.

  • The fraud mule scam hurts a staggering number of innocent people:
    – The merchant.
    – The owner of the stolen credit card.
    – The “fraud mule,” the person who unknowingly reships stolen products.

For a more in-depth description of this scam and how to spot it, check out our blog post on fraud mule scams.

The shipping costs scam

The scammer starts by inventing a fictional freight forwarding company. They may try to make it look credible by creating a fake website or giving it a name close to the name of a real freight forwarder.

They then place a large order with your business and ask you to deliver it to his “freight forwarder,” presenting it as a real company. They will ask that you cover the cost of shipping and promises to reimburse you. Since the “freight forwarder” belongs to the scammer, he’ll keep any money you send him and then cut off contact.

Are Freight Forwarders Orders Ever Safe?

Simple answer, yes. But that’s what makes everything so tricky!

There are plenty of genuine customers who use freight forwarders. For example, some use reshipping services to order products that can’t be shipped directly to their country.

Other international shoppers use freight forwarders to save money. Many people who live outside of the USA prefer American brands, which can be prohibitively expensive when purchased abroad. It’s sometimes cheaper to just order the items from American sites and reship them through a freight forwarder.

These authentic international clients can become your loyal customers, and they often place high-value orders. It would be a shame to decline business with them due to the risk of reshipping fraud.

How to Distinguish Between Legitimate and Fraudulent Orders

While you should be cautious about orders shipped to freight forwarders, denying all shipments to reshippers will result in lost sales and hurt your bottom line—especially since the typical customer that uses a reshipper has a higher-than-average cart value.

The key to successfully identifying fraudulent orders is to look at the other data points for clues.

  • Key data points include:
    – Use of a Proxy
    – IP Location
    – Billing Address
    – Country where the credit card was issued
    – Email longevity
    – Customer order history
    – Reshipper history

Use of a Proxy

IP proxies disguise a user’s internet connection. For a scammer, they’re a way to attempt to conceal their identity and pass as a legitimate customer.

IP Location

It often makes sense for international shoppers to use freight forwarders for the reasons listed earlier. It makes a lot less sense for a shopper in the US to ship to a freight forwarder when they could have accepted delivery directly to their address. An American IP address paired with an American freight forwarder could signify that the customer is only using the reshipper as a “fake address” to cover their tracks.

Do you have multiple orders with different customer names, but all with the same IP address? That’s a red flag. A scammer might be trying to pass himself off as several shoppers to avoid suspicion.

Billing Address

Be cautious when orders are placed from a geographic area you don’t usually do business with, especially when the billing address doesn’t match the shipping address.

Another consideration: an expensive order coming from a low-income area should raise red flags. The order might be coming from a scammer or a “freight mule” unknowingly working for a scammer.

Country Where the Credit Card was Issued

Many scammers use stolen credit cards from other countries. If a customer’s credit card is from one country and their IP address is from another, there’s a higher risk that the order is fraudulent.

Email Longevity

A brand new email account signifies that your customer may be creating a fake identity to try and fool your fraud detection systems.

Customer Order History

When a customer who’s done business with you over a long period of time orders to a reshipper, it’s usually a safe transaction. Be warier of first-time customers, especially when they place expensive orders.

Be suspicious of customers who place many orders in a very short period of time. It’s unusual behavior for legitimate customers, but scammers often hit businesses with clusters of orders to the same address.

Reshipper History

Check to see if the reshipper has been flagged for fraud by other businesses. Can you find this address on a list of registered reshippers? Some fraudsters create fake reshipping businesses as part of their scams. Be suspicious of freight forwarders you’ve never heard of, especially if their websites seem phony or no one answers your requests for verification.

When you pay attention to these data points, it’ll be easier to spot inconsistencies that point to fraud.

How NoFraud Can Help

NoFraud’s AI-powered fraud prevention solution interfaces with your integrated payments process to provide you with peace of mind. It gives you instant, automatic fraud decisions on all your orders, including those headed to freight forwarders. Our screening system analyzes all of the above data points and more (such as global blacklists, AVS mismatch detection, etc.) and lets you ship with confidence to your international clients while steering clear of the fraudsters out there.

Cyber Monday 2021 – Are YOU Ready?

Black Friday. Cyber Monday. Giving Tuesday. Cyber Week. Cyber Month…

What was initially introduced as an eCommerce solution to the traditional brick-and-mortar American day-after-Thanksgiving discount shopping phenomenon has inflated into an online shopping frenzy that can last for months.

Showing no signs of slowing down, this year is poised to be another bountiful one for online vendors, as emerging Covid-variants continue to keep consumers shopping from the safety and convenience of their living rooms, home offices, and mobile devices.

While EMV chip cards have proven to reduce credit card fraud for in-store retail sales by up to 80%, fraud attacks on eCommerce transactions, especially those using e-gift cards, are on the rise in a big way. And that is not the only threat.

CyberMonday 2021

How To Prepare For Cyber Holidays

How can businesses and consumers prepare ahead of what has become the busiest online shopping season of the year?

Be Proactive

Risk and crisis management do not start on Cyber Monday. Every business should have a comprehensive plan that considers peak online sales periods like the November-December holiday shopping rush.

Engaging a professional anti-fraud service well in advance is not just prudent; it’s good business and will help ensure that your online operations are maintained safely and securely throughout the year.

Security. Security. Security.

Did someone say Security?

An online business’ security is key, and that can mean many things. For starters, every eCommerce site must have a valid, verifiable, and up-to-date SSL certificate. Not only will that offer a series of assurances and protections for your customers, but it will also instill a sense of trust that your business is professional and accountable. At a time when new enterprises are sprouting up and creating new competition at a dizzying pace, this is a basic step to be taken and maintained.

  • Some examples of key strategies businesses should employ to ensure security when interacting with consumers:
    – Multi-factor authentication for the login process
    – Security plug-ins, such as those offered by WordPress
    – The use of third-party payment processing systems
    – Internet seals, such as VeriSign
    – Privacy strategies to protect your consumers

Internally, every business should consider which employees have access to which sectors within the business – financial records, consumer information, inventory lists, security protocols, etc. – both online and in-person.

Turn to The Cloud

During peak sales months, website traffic increases multi-fold, and business resources are stretched to the max. One way to help meet the expanded demands of the season is by taking advantage of Cloud strategies wherever possible.

By relying upon horizontal scaling solutions, businesses will be better equipped to handle potential cyber-attacks and the increased sales flow. Once a business has returned to its normal ebb, they may revert to their normal operating footprint.

Consolidate for Unified Commerce

Throughout history, commerce was largely conducted in person. Within the last number of decades, it evolved into a faceless, impersonal practice that transpires at arm’s length through the internet. Today, a paradigm shift to what has become known as “unified commerce,” the use of a technology platform to combine in-store, mobile, and eCommerce business, has taken hold.

In fact, a study conducted by well-known retail consulting firm Boston Retail Partners found that 81% of the companies surveyed took a unified commerce approach as of last year. Why is this important? While both in-store and online security and authentication mechanisms have been in play for some time, they have functioned independently of each other, drawing on their own unique channels and data sources.

In today’s rapid-fire world of options, consumers can now choose from various blended options – pay online, pick up curbside, or have delivered. Pay in-store and have items delivered at a later date. Purchase something in-store and then order an accessory to the item slightly later from home, online.

Earlier platforms designed to detect suspicious activity no longer work as effectively in this multifaceted environment. A single, consolidated approach to fraud prevention and management that pulls data from all available sources and channels is what will provide the sophistication now needed in today’s more complex retail reality. If your business hasn’t done so already, now is the time to explore your options for a robust fraud prevention solution with an experienced servicer.

Battle of the Bots

Know thine enemy.

Have you ever heard of bots? They are the “web robot” software apps designed to run automated tasks over the internet, increasingly for malicious reasons, such as in the cases of malware bots and ad fraud bots.

Note that not all bots are bad; there are good bots too, such as Google bots or scraper bots, designed to aggregate information for consumers to improve their online shopping experience. Bot awareness—the good, the bad, and the ugly—is essential to anyone involved in the retail industry.

Bots run by fraudster “masters” aim to disguise themselves as legitimate traffic and wreak havoc on a business’s holiday ad campaigns. They waste dollars earmarked for real advertising as they divert ads to other bots instead of real consumers or even generate DDos (Denial of Service) or ransomware attacks during a most vulnerable and potentially lucrative time of year. Competitors could potentially flood a website with malicious bots aimed at disrupting service, re-routing traffic, flooding a website, stealing consumer or other proprietary information, or manipulating pricing schemes.

With studies attributing an astounding nearly 50% of all web traffic to bots of all kinds, it is critical to engage an experienced servicer like NoFraud.com to sift through and detect the beneficial bots for retailers, while effectively blocking out those that are malicious. During peak traffic spikes synonymous with the holiday season, it makes good sense to get this into place well ahead of time.

Remove Friction from Sales

Some businesses overshoot their security protocols and implement extreme security measures that ultimately turn away would-be customers, or at the very least, cause a level of friction between them, reducing the consumer-centric model most retailers aim for. They do this in an effort to deter fraudulent activity, which in fact costs retailers a painful $9 billion in losses every year.

What is even more surprising, though, is that false positives, such as when retailers reduce their threshold for declines, due to spiking traffic during holiday seasons, cost online businesses a whopping $180 billion in losses. An anti-fraud solution must take this all into account, obviously preventing fraudulent transactions, but even more importantly, removing the friction that might impede legitimate ones.

While not an exhaustive list, these steps are some of the key strategies to help retailers prepare for what’s shaping up to be a rigorous 2021 Cyber Monday and beyond. NoFraud.com offers solutions to combat the threats expected to peak during this time of year and ensure that legitimate sales are processed at a maximum rate with optimal consumer satisfaction. Contact us today for a consultation and to see how our solutions will help your business capitalize on the coming holiday season.

A Final Word for Consumers

  • And consumers, what about you? While the scope of this post is aimed at retailers, the following are a few notes on best practices for anyone interested in shopping online in general, and especially during the holiday shopping season.
    – Make sure that your device is up to date with appropriate anti-virus software.
    – Never shop or share personal information over an unsecured Wifi hotspot. You will know that it is not secure if it does not require a password to access it.
    – Look for the padlock icon on your browser bar or make sure that the retail site you are in is legitimate and is the real one you intended to visit. Its URL should begin with “shttp” or “https.” Oftentimes, fraudsters will divert unknowing website visitors to mirror sites that are malicious in nature.
    – Spend a few minutes reading through a website’s privacy policy so that you will understand if and how your personal information will be used or shared with a third party.
    – Keep a record of all transactions and verify all credit and debit card statements to ensure accuracy. Immediately report any errors, discrepancies, or surprises.
    – And most of all, enjoy your shopping experience. Now more than ever in history, the world is literally open to us, and we can enjoy the wares from just about anywhere on earth. Shop safely and securely and happy holidays!

Proactive Review: What it is and How it Works

At NoFraud, we talk a lot about our Proactive Review approach. But what does that mean exactly? Don’t all fraud prevention companies with chargeback guarantees offer some kind of review? What does it mean to be proactive?

To explain how Proactive Review is different, it’s helpful to understand how fraud prevention companies think about risk.

What are “Grey” Orders?

It’s usually quite evident when a transaction is very trustworthy or untrustworthy. Every fraud software uses algorithms that analyze the data from dozens of sources to determine whether there are enough trust factors or risk factors to automatically pass or decline an order.

The challenge comes with orders which fall in the middle of the risk continuum—transactions that are not obviously trustworthy, yet they aren’t obviously fraudulent either. We call these transactions that display a significant number of both trust and risk indicators “grey” orders because they contain a high degree of uncertainty.

For example, let’s say an order shows some suspicious signs: the address listed with the bank doesn’t match the order, and the email used to place the order is brand new. These could be signs of a fraudster at work, or they could be signs of someone who just started a job in a different city making a purchase using their new company email.

Since this transaction also shows trust factors (CVV match, no risky device detected, etc.), it would likely fall under the category of a “grey” order. So without further review or verification steps, the determination of whether this order gets a pass or a fail is going to be dependent on your fraud prevention provider’s risk tolerance.

How Most Fraud Prevention Providers Deal With Risk

Most full-service fraud prevention solutions rely heavily on automation for decision-making. This means that their algorithm contains a threshold for the amount of risk that they are willing to tolerate. Anything above that threshold will be automatically declined based on the risk score determined by the algorithm.

If the fraud provider uses a more conservative threshold, you get the benefit of rooting out more fraudulent orders. However, the downside is that you’re almost certainly declining good customers as well. On the other hand, an aggressive approach may allow more fraudulent orders through, but you benefit from fewer false positives.

Some fraud prevention companies will even allow you to choose different risk thresholds in the form of a guaranteed order approval rate. For example, if you pay a higher percentage per transaction, they will provide you with a higher approval rate simply by increasing the risk threshold behind the scenes.

However, like with insurance companies, the rate you are charged is carefully calculated to avoid losses on behalf of the fraud company. You might be guaranteed a higher order approval rate, but you’re paying for it in the form of higher fees. Not to mention the additional downsides of encouraging more fraud attempts and negatively impacting your relationship with your payment processor.

The NoFraud Difference: Proactive Review

NoFraud’s Proactive Review approach is entirely different. Rather than over-relying on automation, ALL “grey” orders are automatically escalated to our analyst team for review. We also proactively review select high-risk orders, such as orders with a very high order value.

While grey orders make up a small percentage of transactions (usually less than 0.5% for most merchants), how you approach these orders makes a huge difference. Adding an extra layer of review for orders with the highest degree of uncertainty results in more accuracy overall. For instance, a transaction that is flagged by the algorithm to show a high likelihood of fraud is often confirmed as legitimate after further scrutiny by a trained analyst.

In the example of the suspicious order above, a NoFraud analyst would determine through additional research that the purchaser has started a new job at a company whose name matches the email used for the order. In this case, after review, our analysts would pass the order that other fraud software would automatically decline.

Our Proactive Review process enables us to meet our goal of approving the highest number of legitimate orders possible. In fact, most merchants who switch to NoFraud see a reduction in order declines by half, all without increasing the number of chargebacks received.

Proactive vs. Reactive Escalation

So if other fraud companies have a review team of analysts, how is NoFraud different? The difference is in how transactions are escalated for review. While it’s true that most fraud prevention companies do give merchants the ability to flag transactions for review, the onus is on the merchant, rather than the fraud prevention provider, to escalate those orders for further scrutiny. In short, you, the merchant, need to work to get risky orders approved.

In contrast, with Proactive Review, grey orders are escalated automatically, which not only results in a higher-order approval rate but also means that you no longer need to spend valuable time “checking the work” of your fraud analysis software.

While all this happens behind the scenes, the results speak for themselves. Below are just a few reviews NoFraud has received from customers who have switched from other major fraud prevention providers:
_________

“I ran Signifyd and NoFraud at the same time. My approval rate with Signifyd (Revenue) was 90.91%. The approval rate (Revenue) with NoFraud – 97.2%. Switching to NoFraud is a no-brainer.”

Digital Supply USA
Review, Shopify App Store

_________

“NoFraud was recommended to us as a means of increasing our sales. Because NoFraud takes more steps to validate the potential for risk, and the opportunity for passing the customer’s order through, we hoped to be able to increase the number of passed orders, without assuming more risk. We asked NoFraud to prove their claim. They set up a side-by-side comparison with our existing fraud prevention service provider over a two-week period… The overall benefit from NoFraud was evident in the total net value of orders PASSED by NoFraud that were FAILED by our existing provider.”

Smoke Cartel
Review, Shopify App Store

_________

“We switched a year ago from Signifyd to NoFraud and not only did my approval rate increase drastically but pricing was also a lot more competitive.”

DailySale
Review, Shopify App Store

__________

Summary

Bottom line, NoFraud loves advanced analytics as much as the next guy (99.5% of our orders are automatically decided via our algorithm). Still, we also know that maximizing order approval rates requires a combination of both algorithms AND human insight. That’s why we use Proactive Review to make this process as seamless as possible for our customers.

Fighting Chargebacks: The 5 Mistakes Merchants Should Avoid

Because the internet provides great anonymity and transactions are conducted at arm’s length, there exists the unfortunate misconception that online fraud is not really hurting anyone. This deception couldn’t be further from the truth. A recent 2021 statistic cited a sobering 15% increase in online retail fraud since before Covid hit the nation, much of it due to bogus chargebacks.

It’s not just fraudsters who are at work—using stolen credit card information to make purchases. More and more, businesses are being confronted with waves of friendly fraud. These are customers who, in bad faith, make claims that the items they ordered weren’t received, were damaged, or otherwise did not meet their expectations. It’s one thing to work out legitimate issues with the merchant; it’s another when people deceive banks and repeatedly abuse policies meant to serve the customer.

When the inevitable happens, and you receive a chargeback, whether it’s fraud-related or not, if you don’t have a strategy for how to dispute the claim with the bank, there’s a good chance you’re leaving money on the table.

5 Strategies to Help Fight Chargebacks

The following are five strategies to help online retailers fight chargebacks in a way that is most likely to lead to a positive outcome.

  1. 1. Education: Know What the Banks are Looking for

When faced with a chargeback, the first step is to counter the claim with the issuing bank. Most institutions have set deadlines and limitations for counter-filings, so it pays to be mindful. A counterclaim must have merit and provide compelling evidence to back it up, tailored to the bank’s unique reason codes. Banks can be quite particular about what evidence they are looking for and the format in which it is communicated. They also do not want more evidence than they request in their reason code guidelines. Even something as seemingly mundane as the order in which evidence is listed can represent the difference between a win and a loss. Be clear and concise and avoid emotional responses.

2. Reason Codes that Seem Unreasonable

Many people have a tough time understanding the various banks’ reason codes. To make matters more complicated, these codes are dynamic, often evolving based upon consumer expectations and the various card brands. Keeping abreast of all developments is essential in the fight against chargebacks. When submitting a counterclaim, evidence must be submitted to support the reason cited. While this might sound obvious enough, each bank has its own unique and complex set of requirements for what they consider allowable evidence for each reason type.

For example, as part of its overhaul in 2018, credit giant Visa consolidated its twenty-two reason codes into four distinct categories: fraud, authorization, processing errors, and customer disputes, each with its own guidelines. Ensuring that business teams are up to date with major chargeback reason codes is key to helping retailers resolve and win disputes more quickly and consistently.

3. Look for a Win-Win!

A common misconception is that “winning” a dispute in pre-arbitration is a true win. It is not, as it only represents half the battle. Businesses should be aiming for a win-win.
When a merchant decides to dispute a chargeback, they hope that after looking over the evidence, the issuing bank will immediately conclude that the chargeback was illegitimate and reverse it. Unfortunately, that’s not always the end of the story, and that’s where pre-arbitration comes in.

When moving into the second phase, retailers must submit their case again or accept liability. Furthermore, many merchants erroneously believe that their win rates are higher than they truly are because they are only tracking the initial outcome of their cases without realizing how much revenue they already lost to pre-arbitration. The vast majority of cases that begin with pre-arbitration will ultimately be ruled in the cardholders’ favor.

Having a detailed pre-arbitration policy in place that follows a consistent initial response process to avoid arbitration altogether will positively impact your win-win rates. Also, remember that tracking must be an essential aspect of your chargeback strategy. Without proper tracking, it will become impossible to know whether any of your current strategies are working.

4. Ignoring Patterns and Red Flags

Don’t lose sight of any patterns, red flags, or troublesome statistics that may suggest an increase in chargebacks. Is there a reason why chargebacks are increasing at this particular time of year (or anytime for that matter?) Are there process changes you can make in your operations or customer support services to reduce the likelihood of future cases? Understanding the various reason codes outlined by banks for chargebacks and how they relate to your business’s internal processes will allow for the necessary adjustments in advance of this type of fraud activity. The key is proactivity – anticipate, identify and rectify issues before they translate into lost revenue.

5. Not Tracking Operational Costs

Disputing chargebacks is both time-consuming and a drain on human resources. Often, businesses fail to track the resources dedicated to fighting chargebacks. A business that spends an inordinate amount of time and manpower in the rebuttals it launches, without the results it anticipates, should reevaluate its strategy.

As scheming fraudsters become stealthier, quicker, and more sophisticated in their activities, the threat may seem overwhelming to businesses. The good news is that companies like NoFraud, specialize in anti-fraud strategy and services, including its Chargeback Management service. Save time, money, and brainpower by offloading your entire chargeback management process to NoFraud’s expert chargeback specialists. Their seasoned professionals will investigate, assemble evidence, prepare compelling rebuttals, argue before the issuer, and provide you with feedback on avoiding these types of chargebacks in the future.

To learn more about NoFraud’s Chargeback Management offerings, visit NoFraud.com.

False Declines: What Are They and How to Prevent Them

The eCommerce industry is growing rapidly. It’s become more critical than ever for merchants to realize how false declines can significantly impact their bottom line.

False declines can be a bigger problem than fraud itself. Research by Javelin Strategy shows that 15% of all cardholders have experienced a false decline in the past year. Furthermore, in the US alone, $109 billion more was lost to credit card transactions falsely identified as fraud than to actual credit card fraud.

The value of False Declines is more than 13 times the total amount lost to actual credit card fraud. Yup, you read that right. For every $1 in losses due to credit card fraud, merchants lose $13 to false declines (Aite).

What Are False Declines?

To understand false declines, you need to understand what happens behind the scenes when online orders are placed.

Online transactions must pass through payment gateways that are set in place by companies. These gateways may contain filters at each step during the online order process, set up to try to detect fraud. Orders are not approved unless they pass gateway filters. If one of these filters indicates that an order is fraudulent, the order gets blocked by the system and cannot be placed by the consumer.

While these filters may do a fair job of detecting the most obvious fraud attempts, they often make mistakes. When a fraud filter flags and blocks legitimate transactions, this is called a false decline (or a false positive).

False declines are not usually accounted for in fraud losses because they can be tough to quantify. Many companies are unaware that many of their orders declined on fraud suspicion are actually from good customers. Yet. 58% of declined transactions have been proven to be perfectly legitimate orders. This is costing companies money.

How False Declines Happen

Since fraud filters use simple rules or algorithms that judge common characteristics of fraud as inputs, there are many reasons why a purchase can be declined.

Some typical reasons orders get declined include:
• If the location of the shopper is different than previous purchases
• The delivery address is different than the consumers billing address
• If the shopper requests the fastest shipping method
• Inconsistent order data – for example: if the zip code and city don’t match
• Larger than average order
• Multiple shipping addresses
• Multiple orders from many credit cards
• Missing card information

False declines are so common because companies are over-reliant on automation to screen their orders. For instance, there might be a legitimate reason why the customer’s billing address doesn’t match their shipping address. And companies who only rely on simple fraud filters are missing out on several diverse data sources that give you a much more complete picture of the transaction’s risk profile.

The Cost of False Declines

While false declines have an immediate impact on revenue due to canceled orders, the main cost of false declines is the long-term result of unhappy customers. After an experience with a false decline, dissatisfied customers tend to take their business elsewhere – perhaps never to return – and spread their poor experiences with others. But that’s not the only cost of fraud.

3 Major Ways False Declines Hurt Your Company

1. More unhappy customers
2. Less revenue generated
3. Damaged Reputation

Unhappy Customers

Look at a false positive from the lens of a buyer: You spend hours researching a product online, comparing features, and reading reviews. Finally, you decide to buy the item at a trusted store, only to have your purchase blocked by the store. How would that make you feel about the company you had decided to trust?

From a customer’s perspective, a false decline can be unsettling. More than 80% of cardholders who experienced a false decline said it wasn’t just inconvenient but embarrassing and aggravating.

In Javelin’s survey of 3,200 U.S. consumers, 32% said they wouldn’t shop with a merchant again following a decline.

Less Revenue Generated

False declines cost a lot more money than you think. Since the value of declined orders is 1.6 times higher than the average purchase, online merchants are losing more revenue to false declines.

Javelin reports that U.S. merchants lose nearly $118 billion each year to falsely declined transactions. This may be because most eCommerce merchants don’t realize that false declines can cost them up to 13 times as much as fraud itself.

According to the Merchant Risk Council’s 2017 Global Fraud Survey, the average online store declined 2.6% of all incoming orders because of fraud concerns. These same merchants declined 3.1% of all orders valued at over $100.

Damaged Reputation

Frequently after having a negative experience with a company, consumers find outlets to vent their frustrations. An American Express study found that consumers tell an average of nine people about their good experiences, but they tell 16 people about the bad ones.

These days, poor buying experiences don’t just spread by word-of-mouth. They’re glorified all over social media, product reviews, and business review sites. Consumers trust other consumers. These reviews placed on the internet by other consumers shape the decisions of future potential customers.

How to Reduce False Declines

   1. Stop Relying on Gateway Filters: Unfortunately, simple rules such as auto-declining orders with an AVS mismatch are not a smart way to manage fraud. In fact, at NoFraud, we find that about 90% of transactions with an AVS mismatch are accepted as good orders. If you’re relying only on gateway filters, you’re almost certainly being way too conservative in your approach.

   2. Rely on Dedicated Fraud Analysts: In organizations where customer service representatives primarily manage fraud screening, you might have more false declines than expected. This is because most CSRs don’t have the expertise or incentives to take measured risks regarding fraud pass/fail decisions.

While it’s easy to determine which representative is responsible for approving an order that ended up being a chargeback, false declines are nearly impossible to track. Additionally, CSR performance is measured based on customer satisfaction, not on revenue or order approval rates. Therefore, most CSRs tend to be overly cautious, resulting in more false positives.

   3. Choose the Right Partners: There’s a reason why full-service fraud prevention solutions are known to improve order approval rates. Fraud companies leverage diverse data sources and large customer networks that eCommerce businesses just don’t have access to. This results in far more accurate decisions than simple rules-based filters can provide.

At NoFraud, accurate decision-making is nothing short of an obsession. We know through experience that pushing order approval rates as high as possible requires a combination of powerful analytics, diversified data sources, AND expert review. While 99.5% of transactions are determined through advanced machine learning, NoFraud also automatically escalates all “grey” orders to seasoned fraud analysts. We call this Proactive Review, and it’s the reason why merchants who switch to NoFraud can cut their order declines in half.

False declines can be highly damaging to a company’s bottom line. With the continuous growth of the eCommerce industry, merchants need to realize how false declines happen, and more importantly, how they can prevent them.

Referral Fraud: What It Is and How To Prevent It

As part of the online war companies wage to win consumers, referral programs have been critical to marketing growth tactics. Referral marketing is most effective when managed efficiently and optimized to attract the right customers. Unfortunately, recent findings have shown a new form of fraud rising and wreaking havoc on marketing and eCommerce teams.

Too many merchants are unaware of evolving fraud patterns among their digital orders. Even worse, in some cases, they are directly paying for that fraud. This occurs when fraudsters target merchants with generous referral programs to recruit new customers and receive gift cards or other valuable service elements for free.

A few notable referral programs (note: these have not been proven to have referral fraud…yet)
Tesla – Each Tesla owner can give friends up to 10 US$1,000 discounts.
Airbnb – $18 per qualifying stay and US$10 per qualifying experience
Disney – Get paid for each qualified user that signs up for Disney+
• Rent The Runway – Give $30, get $30

How Referral Fraud Works

Fraudsters hope to secure these referral benefits by signing up to the merchant’s referral program. They then proceed to refer ‘customers’ to the merchant. However, many of these ‘customers’ are the fraudsters placing fake orders on stolen payment credentials (credit cards, PayPal, BNPL, etc). They create profiles with information that makes them look as legitimate as possible.

The merchant then pays the fraudster for the referral, and the fraudster redeems the reward. If the order is not caught, it will likely result in a chargeback from the cardholder.

In cases where the referral rewards can be “cashed out” without requiring a future purchase, the fraudster is not looking to receive items purchased by referred “customers.” Their goal is only to obtain a referral reward, such as a gift card or cash bonus. This gives them an advantage, as they can enter any shipping address they want (including the actual cardholder’s address!), and that flexibility is a critical element of their success.

In other cases, fraudsters will utilize this scheme targeting merchants with items they can easily “fence” (sell on 3rd party marketplaces or auction sites to unsuspecting consumers looking for a deal), while also accumulating multiple promotional codes for referring new “customers”. In this case, they will send the items ordered to drop addresses where they can easily pick up the items. They will often sell bundles of promotional codes on fraudster forums, allowing the purchasers the ability to buy more items at a heavily discounted rate.

This Affects More than Fraud & Security Teams

Referral marketing allows businesses to tap into their existing community to gain new customers. However, fraudsters are increasingly trying to cheat loyalty programs. Loyalty program fraud increased by a whopping 89% in 2019.

Fraudsters taking advantage of these programs cost marketing teams a lot of money in customer acquisition costs (CAC), which results in a loss of money, not to mention skewed analytics for marketing performance.

Talkable, the leading referral marketing platform, explains that the three most common ways that this type of fraud can hurt your business are: forecasting false numbers, losing profits, and losing time.

How to Prevent Referral Fraud

We get it – referrals are great for the average merchant. According to ReferralCandy, referred customers bring you 25% higher profit margins AND are less likely to leave.

It is important to note that the continuing rise of this fraud pattern demonstrates the need to have a dynamic system in place to identify fraudulent orders and evolving threats. Marketing and eCommerce teams need to understand the types of orders that come through and if there are spikes in certain referral programs, they are currently running.

Tracking orders by the codes provided in your referral program from the time they are issued to when they are redeemed can provide an opportunity for identifying fraud through data analysis. If you start to see a high volume of orders that provided or received referral codes result in chargebacks, this is a strong indication of a referral fraud problem.

As an evolving fraud tactic, a team like NoFraud is critical as we can spot these orders through the combination of both technology and human fraud analysts. Traditionally, these would have slipped through the cracks, but NoFraud can provide insight into these trends and stop them from costing your business money.

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    Similar articles:
Affiliate Fraud
How to Combat Referral Abuse and Fraud?
Preventing Referral Fraud in Loyalty Programs

Consumer Fraud: What Is It and How To Protect Yourself Or Your Business Against It

Consumer Fraud. This familiar, catch-all phrase describes business schemes aimed at unsuspecting consumers. Resulting in financial or other loss for the victim while enriching the perpetrator. It evokes an ominous sense of exposure.

Many of us feel vulnerable to the dark side of online engagement and its world of hackers and other unscrupulous characters.

So what exactly is consumer fraud, and what sort of practices fall under that vague category? More importantly, how can we protect ourselves and our businesses against it?

What Is Consumer Fraud?

According to newly released data, the Federal Trade Commission received more than 2.1 million fraud reports from consumers in 2020, with imposter scams being the most common type of fraud reported.

With the ever-expanding offerings and reach of the world wide web, consumer fraud is at an all-time high.

The adoption of 5G across great swaths of the nation and around the world, while changing the landscape with its increased capacity for speed and data transfer, is also creating new vulnerabilities that could contribute to increased consumer fraud.

  • Victims of this practice, while believing that they have been engaging with legal and valid business entities, fall prey to a variety of schemes involving:
    • False promises
    • Inaccurate claims
    • Deliberate misrepresentations, or
    • Direct, straight-on cheating.

What Does Consumer Fraud Look Like and how are we Protected?

  • Some of the most common schemes under the consumer fraud umbrella include:
  • • The notorious Nigerian and debt elimination scams
  • • Frauds involving dubious cashier’s checks for payments
    • Mortgage scams
    • Phishing
    • Identity theft

The US and other governments have enacted regulations and protections against consumer fraud. The US Federal Trade Commission established the Bureau of Consumer Protection and passed the Federal Trade Commission Act to protect American consumers.

In the case of a mortgage or other real estate frauds, certain laws act as safeguards to prevent losses from occurring. Anyone who has ever purchased a home in the US is familiar with the TILA, or Truth in Lending Act, which ensures that all credit gathering details, calculations, and fees are disclosed to buyers in a clear and upfront fashion ahead of the sale.

Some other governmental interventions include the Fair Debt Collection Practices Act, which addresses tactics employed by the debt collection industry; the Fair Credit Report Act, which relates to credit reports and ensures that every American is entitled to a free copy of their report at least once a year; and the Magnuson-Moss Warranty Act, which deals with warranties on retail products purchased. And for those not covered by these Acts, consumers can lean on their individual states, the majority of which have their own UDAP (Unfair, Deceptive Acts and Practices) laws on the books.

  • Most states define consumer fraud as
    • An affirmative misrepresentation
    • Knowing omission, or
    • Violation of specific consumer protection

Collectively cover a broad range of consumer fraud activities. When faced with consumer fraud or attempts thereof, the best practice would be to contact one of these agencies to file a report for official follow-up, investigation and in the best case scenarios, corrective action through civil litigation.

While reassuring, many of these remedies are reflective and apply only to the aftermath of a fraud violation. There are steps individuals and businesses can take to stymie fraud attempts that they face proactively.

How To Protect Yourself Or Your Business Against Fraud

Let’s say you purchased an item online. What if it arrives and it does not reflect the description or image of what you ordered? Some vendors subscribe to a seal or trustmark insurance program that often will provide a money-back guarantee in situations like this. Some programs even offer an ADR (alternative dispute solution) service, which relies upon a third party to resolve all disputes.

Businesses that refuse to participate in the ADR process run the risk of losing their seal certification; the purpose is to provide consumers with a significant level of confidence while shopping. For increased peace of mind, it is worthwhile to verify if the vendor you are planning to purchase from participates with any of the most established seal and trustmark programs and ascertaining their policies in advance.

Another service that is gaining traction in the retail arena is the utilization of escrow services. This simple feature employs a third party to hold a customer’s money until they are in receipt of the goods or services they paid for and are satisfied with. Sometimes, there are minimal fees associated with this service, but this is an excellent option for those who are nervous about making online purchases for fear of consumer fraud.

Beware of Phishing

Many of us have heard of the disconcerting homophone phishing. This is a practice that quite literally baits unsuspecting targets by posing as legitimate entities for the sole purpose of extracting personal information, banking details, or passwords.

The solution to this is simple.

  • • Reject or delete all unrecognized communications that request your private information.
    • When in doubt, verify manually by calling your bank or credit card company.
    • Install an anti-phishing toolbar, which most browsers now offer, as well as anti-phishing pop-up blockers.

As with everything, especially in our break-neck evolving electronic world, keeping abreast of new developments, following the latest news, and remaining current make good sense.

Good sense is key to avoiding the pitfalls of consumer fraud. When in doubt, make a call, do some homework, such as a background check, verification of credentials or licenses, and getting all agreements down in writing. If something or someone sounds suspicious, they very well maybe, and it is worth going the extra mile to ascertain their legitimacy and right intentions.

Beware Of AI Voice Cloning Softwares

A current trend that is increasingly worrisome is the use of AI voice cloning software by unscrupulous agencies. The ability to almost perfectly copy a person’s voice, tone, and inflection to create dialogue that is fabricated for nefarious reasons are almost unthinkable, yet it’s real and has already been employed in ransom demand attempts and other identity theft efforts. With little recourse at present, other than manual verification with the cloned subject and potentially law enforcement involvement, this is a troubling new reality worth keeping an eye on.

Reputable Anti-fraud Providers

Finally, a critical component of any consumer fraud protection strategy is engaging with a reputable anti-fraud provider who offers a proven anti-fraud solution suited to your specific business or concern.

An ideal program will automatically detect discrepancies in behavior or data, contain a repository of threat intelligence on known bad actors to run checks against, and provide excellent communications in a proactive and consumer-forward manner.

The market is saturated with an array of sub-par offerings that are heavy on promotion and light on substance. A little extra due diligence will go a long way, and with a mixed approach, your exposure to consumer fraud will be significantly diminished.

For more information on how you can prevent consumer fraud, visit NoFraud.com.

The Fraud Risks of Buy Now Pay Later Orders

The “buy now pay later” (BNPL) solutions are quickly gaining adoption as consumers look for new financing options and merchants aim to drive sales. More than one-third of the United States and United Kingdom shoppers use BNPL options, including half of Gen Z and the millennial generations. 

In addition, as many as 30% of Australian adults now have one or more Buy Now Pay Later accounts, which makes for roughly 5.8 million users nationally.

How Consumers see the By Now Pay Later Option

The BNPL option provides a comforting financing option for those who need it. 

Consumers see BNPL as an option to:

  •    • Avoid paying credit card interest
  •    • Make purchases that ultimately would not fit their budget
  •    • Borrow money without a credit check
  •    • Purchase if the consumer dislikes using credit cards
  •    • Circumvent getting approved for a credit card
  •    • Purchase because their current credit cards are maxed out

One commonality within the ever-growing list of BNPL providers is that they mainly offer ‘no fraud liability’ to the merchants they service. Many merchants see this as a reason to give the green light to processing all BNPL orders, no matter how risky they may otherwise look. 

While BNPL orders may not result in direct chargeback costs to the merchant, there may be indirect consequences for merchants that process all such orders.

A Closer Look into BNPL

BNPL services are growing at a rate of 39% a year, with its market share set to double by 2023. By then, 3% of global e-commerce spend will be through BNPL services. Furthermore, 85% of consumers who have used BNPL services plan to continue doing so in the future

BNPL is here to stay, therefore merchants should understand the ins and outs of the process and how BNPL fraudsters can affect their business. 

Brand Impact

If fraudsters discover that they can successfully place BNPL orders on your site without being detected, the chances are they’ll publicize this on both the dark web and more public forums. This publicity of being ‘wide open’ can make your store a target for additional fraudulent orders and other types of fraud, including regular credit card fraud.

The simplicity and increasing adoption of BNPL orders can leave merchants exposed and vulnerable to unpredictable fraud losses and a negative PR outlook from brand loyalists.

Threats

The threats BNPL solutions pose to payment incumbents—including card networks and issuers—are growing, and recommendations for vendors vary on vertical, location, processes, and everything in between. 

Differing Fraud Detection

BNPL providers will naturally only fraud screen BNPL orders. Without a holistic view of all orders, BNPL orders that match a store’s unique fraud pattern might not be identified and stopped. 

Fraudsters will use these alternative ways of getting a merchant’s products where there is no other method to do so.

Fraudsters are usually very smart. They know merchants may assume orders created with certain payment methods have no fraud liability to them and auto-approve those orders (per existing business practices). So, fraudsters will place their initial order attempt via one of these companies to establish legitimacy as a customer. 

Once that order goes through, many merchants and fraud systems will consider that customer a ‘trusted’ customer. The fraudster will then change the payment method on that account and make additional orders with actual stolen credit card information.

BNPL Whitelisting Fraud Pattern

A specific fraud pattern involving BNPL orders is increasing in popularity. The pattern contains the following steps:

  1.    1. A fraudster places a couple of low-value BNPL orders with a merchant.
  2.    2. The merchant processes the BNPL orders without proper fraud screening, as they know they will not be liable if it is a fraudulent order.
  3.    3. The fraudster then places a high-value credit card order with a stolen credit card.
  4.    4. The merchant approves and processes the high-value credit card order, as they view the shopper as a trusted repeat customer.

The fraud departments of many BNPL providers are now in a position of playing catch up. Some providers are altering their contracts to place more onerous conditions on merchants regarding fraud liability. It is essential for merchants to pay close attention to these conditions and to be as prepared as possible to meet those conditions.

Merchants Need to Consider the Risks

Merchants need to understand that before approving and processing all BNPL orders, they must consider the above risks and not disregard suspicious orders.

With BNPL, fraud rates may rise because merchants may loosen their fraud techniques for the sake of acquiring the sale. As a result, cybercriminals will gravitate toward merchants that have less fraud protection to find the path of least resistance.

There is no overarching approach other than ensuring your fraud detection techniques evolve and adapt to the growing market to avoid getting blindsided by evolving cyber-attacks.

 

– Click here for some fraud prevention tips you can implement to your business today.

– To learn about how NoFraud can help your store seamlessly screen your orders (including BNPL orders) for fraud, visit our website.

Reroute Fraud – The Growing eCommerce Problem

Reroute Fraud – The Growing eCommerce Problem 

A Guest Post by Fraud Expert Alexander Hall 

Summer is here. What does this mean for merchants?

The data from our friends over at NoFraud paints a clear picture: during Summertime, fraudsters kick into gear rerouting, intercepting, or hijacking packages of products relevant to summer activities. This concept is nothing new, as the needs of fraudsters are the same as ours. Fraudsters are constantly evolving their tactics to target hot items, and this changes with the emergence of new trends, seasons, releases, and technology upgrades. 

This specific shift in fraudulent directives affects merchants of many industries as the seasonal products range from pool equipment to clothing and apparel, to BBQ accessories, and more. 

Below I have outlined four methods employed by fraudsters and what merchants can do to reduce their exposure and mitigate losses. 

The Methods: 

During my time spent on the other side of the fence, I observed four primary methods used by bad actors to obtain goods illegally. 

Non-Fraud Methods

  1. 1. Package Hijacking

The first method is most familiar. Legitimate customers place orders using legitimate payment methods, but the items are stolen after delivery. Criminals will go as far as to follow the routes of delivery trucks and brazenly pull up to houses and steal the package. Criminals operating in this way are known as porch pirates. The porch pirates have no idea of the contents of the package but are willing to risk jail time to find out. Due to the increase in purchasing of summer-related items, this lends to the uptick in losses identified by NoFraud.

The theft of legitimate packages isn’t so much fraud as it is blatant theft. However, the result is the same for the merchant. Chargebacks for these events are received and coded for unfulfilled or item not received. 

Fraud Methods

The remaining methods are actual fraud. Each of these methods employs different tactics and therefore produces different flags for the merchant to identify. But all of these methods involve the following steps:

– Obtain payment information. 

There are two primary ways for a fraudster to obtain payment information. They can obtain stolen information or establish new payment information and leverage that data. For this article, we will stick to stolen payment information, which is the most common. 

When a fraudster establishes new cards or accounts, they have likely put in the effort to manipulate the necessary information so that they don’t need to redirect successful transactions. When effective fraudsters establish new lines of credit, they tend to use additional techniques in order to associate new addresses with the identity that they are targeting. This results in matching billing and shipping information that the fraudster dictates. 

Fraudsters obtain stolen payment information in many ways, the most prominent channel being Dark Web exchanges. Fraudsters will search various Dark Web forums and purchase stolen information. The information obtained on the Dark Web can include card numbers, account holder names, CVVs, billing addresses, and more. Alongside the payment information are step-by-step instructions for how to complete orders. The information in the instructions may include information that can increase the chances of circumventing fraud filters. 

– Place the order. 

By following the instructions found on the dark web and plugging in the stolen payment information, the fraudster places the order. Fraudsters will often filter through billing addresses on the Dark Web forums to purchase card information local to their operation. This is where the first and least reliable method comes into play. 

  1. 2. Shipping Items to a Non-Billing Address

In this method, the fraudster follows the instructions found online. They enter accurate and complete payment information but use a different shipping address. The instructions found online indicate that the shipping address can be within a threshold of “X km” from the billing address before an escalation is triggered. Then, the fraudster places the order, taking advantage of merchants that employ rules-based fraud prevention, and the order is shipped.

  1. 3. Adjusting Shipping Information After Checkout, Before Shipment

The third method involves social engineering against the merchant’s customer service team. When placing the order, the fraudster plugs in the correct payment information as well as the shipping address to match the billing. If this satisfies merchants’ fraud prevention guidelines, the order is usually confirmed. Then, expecting the fulfillment to take a few days, the fraudster calls customer service or submits an urgent ticket, requesting that the shipping address be adjusted. 

This tactic can effectively bypass the fraud prevention analysis employed during checkout and takes advantage of a company’s desire to satisfy the needs and requests of its customers. The shipping address is changed, the order is processed, the shipping label (with the new, unrelated address) is printed, and the package is shipped. 

  1. 4. Adjusting Shipping Information with the Courier Service 

The fourth and final method takes place after the package has been shipped and leverages social engineering against the courier service. As with the third method, the fraudster inputs all of the correct and matching billing and shipping information during checkout. Once the tracking information has been received, the fraudster contacts the courier service and uses any number of justified reasons to ask them to hold the package at the post office. For instance, they may say that an emergency came up and their cousin will pick up the package. After providing the postal worker with the information for the “Pickup Person,” the conversation ends. 

The Systems of Manipulation

Before we talk about the steps you can take to prevent fraud, let’s pull back from the granular view of the methods and identify how the fraudster is manipulating existing systems to achieve their goals. 

For the first and simplest method, the criminal drives around and watches for unattended packages. The “system” that is being manipulated is on the level of the general public, people who don’t collect their packages immediately upon delivery. 

In the second method, the fraudsters take advantage of e-commerce systems that haven’t yet employed even the most basic fraud prevention measures. Not all orders with mismatching billing and shipping information will be fraudulent. However, if left unchecked, this can wreak havoc, resulting in enormous losses for the merchant.   

Alternatively, in the third method, the fraudsters identify that an effective fraud prevention system is in place. Instead, they attack the merchant based on its customer satisfaction policies. The needle on the gauge indicating merchant security and customer satisfaction is stuck at 90 degrees, allowing fraudsters to assume the guise of legitimate customers to adjust orders. 

Using the fourth method, which is the most reliable method, the fraudsters understand that the merchant is well-equipped and knowledgeable regarding the processes in their system. The checkout form has additional verifications in place behind the scenes, and the customer service team cannot be duped into making changes during the fulfillment process. 

Because the merchant’s systems are robust, the fraudster engages with the next system down the line and associates a new identity with the order for pickup. The value of assigning a supposed brother-in-law, sister-in-law, or cousin is that the name can be anything. Historically speaking, the postal service does not employ investigational services to challenge this information.

This is an escalation process employed by effective fraudsters. By moving the exploit further and further down the line and finally moving the exploit out of the merchant’s hands entirely, effective fraudsters can maintain a high success rate. This is but one example of many forms of fraud that are becoming more and more evident with each shift or passing cycle.

What can be done? 

There are four critical elements to an effective fraud prevention strategy: knowledge, data, monitoring, and more data

Knowledge of the internal processes and hand-offs within your company is an essential part of your fraud-prevention strategy. It is helpful not to think of instances as “transactions” but as “transfers of value.” The reason for this is simple: Fraudsters are not limited to exploits centered around cash, checks, and cards. Therefore, your fraud prevention strategy shouldn’t be either. By identifying your transfers of value, you have a great starting point for envisioning your fraud prevention policies and processes. All that is left is to fill in the blanks. 

Data is shared at lightning speed among service providers and publications. Stay up to date with the information that identifies emerging trends.  As your company grows outward into new territories, new systems, and new processes, become aware of emerging threats so you can arm yourself against them. 

Monitoring the performance of your company will give you insight worth its weight in gold. Monitor where attempts have been identified in your own operations and report them so that you can raise awareness within your organization. 

This can seem like a truckload of effort, trial and error, and man-hours…and it is. This is where service providers step in to the picture with:

More Data is available for operations who look for it. Public information is powerful on its own. It tells us what to keep our eyes open for. But proprietary information is golden. By partnering with effective fraud prevention solution providers, merchants can leverage a symphony of proprietary data. Service providers use experienced personnel to orchestrate and manage the lifespan of your transactions by referencing a myriad of past information. They then use this data to make the best assertion against suspicious transactions, resulting in an operable balance between merchant security and customer satisfaction. 

How Do Service Providers Do This? 

Consider the first method that I outlined above. By tracking a data-rich network of CNP Merchants who report chargebacks for stolen packages, a part of the analysis might result in the cross streets or zip code being flagged, with action taken to recommend using signed delivery. The data of the merchant network allows for the merchant to be aware of the risk prior to experiencing losses.

Consider the second method: billing and shipping mismatch. By scrutinizing every mismatch, a company runs the risk of prolonging or even canceling good orders in its attempt to catch the bad ones. This risks damaging the relationship with good customers. However, by employing the data from an extended merchant network, analysts may reveal past purchases that fit this pattern. Perhaps a parent orders a gift for the child, a boss for an employee, or brother for a sister, a friend for a friend. You don’t know for sure, but global data networks can help thin the fog. 

With the third method, the “customer” requests to change the shipping address to one different from the billing address. The ‘new’ address likely isn’t in your system. Is it in the merchant network? Are there chargebacks associated with it? It’s unlikely that you will find the answer to these questions in your data, but you can tap into the merchant network of your service provider to find them.

Service providers can also respond to the fourth method by taking a proactive approach. By tapping into reports of past occurrences, service providers cross-reference relevant information with numerous data points from sources ranging from social media to utility services providers to courier services.

By partnering with a fraud prevention service provider like NoFraud, you get access to more data sources and software that operates behind the scenes to automate your transaction analysis. Coupled with a well-informed decision-making process, merchants can rest easy knowing that their operation has the right balance of customer satisfaction and transaction security.