Sarah Elizabeth
Fighting fraud is a 24/7/365 effort. And for every minute an e-commerce merchant spends scanning their transactions for fraud and implementing new filters to catch suspicious orders, cybercriminals spend that same minute finding a way around those fraud prevention solutions.
Although no strategy can guarantee 100% protection against savvy fraudsters, several emerging strategies can improve a business’s chances of catching fraud before it does irreparable damage.
Here are six advanced fraud prevention solutions e-commerce merchants should consider adding to their fraud management arsenal today.
1. SMS-Based Verification
Connecting a verified phone number to a customer’s account when the customer first registers on an e-commerce merchant’s website can improve a merchant’s confidence in an e-commerce transaction.
These solutions send a time-sensitive, one-time password via SMS to customers and can help merchants confidently authenticate a client’s identity — even if customers are accessing their accounts from a new computer or browser or are placing a high-dollar order.
Merchants can also use this text-to-verify solution as a way to immediately text details of a purchase to the number associated with a customer’s credit card, allowing them to confirm or deny the purchase without having to make phone calls or log on to accounts.
However, one caveat: SMS authentication will only work if the customer has their mobile phone with them when placing the order. Therefore, although SMS can be a helpful tool, merchants can’t be 100% dependent on it and must use this tool in conjunction with a more comprehensive fraud prevention strategy.
2. Device Fingerprinting
Device fingerprinting offers merchants a more reliable alternative to cookies or IP addresses to uniquely identify a remote computing device or user.
Fingerprinting uses a variety of data points — like IP addresses, time stamps, operating systems and browsers — alongside services like Google reverse geocoding, to let merchants narrow the location of a transaction to a physical address. It’s an effective way for merchants to confirm that a customer is who — and where — they say they are.
Merchants can also assign a unique fingerprint to a combination of data points, store it to their fingerprint database, and use it on future purchases to confirm their legitimacy. Because normal device fingerprints are generally predictable, fingerprinting can help e-commerce merchants isolate unusual and potentially fraudulent patterns and stop cybercriminals from damaging their business.
3. Knowledge-Based Authentication
When it comes to knowledge-based authentication (KBA), traditional static methods are usually the least effective when it comes to fighting fraud. Questions like “Where did you go to high school” are easy for fraudsters to guess or find the answers to, thanks to the wealth of personal information that can now be found online.
But dynamic KBA improves on this method by creating on-the-fly, time-sensitive questions — like “What was the amount of your mortgage payment last month?” — that are harder for a fraudster to quickly answer but easy for the legitimate customer. Data for these questions is gathered from public records or third-party agencies and is delivered to, but not stored on, an e-commerce merchant’s authentication system.
4. Out-of-Band Identity Proofing
If a customer — or a fraudster — locks themselves out of their account because they’ve mistyped the password too many times, an out-of-band system can call or text the phone number listed on the account and send a temporary password or a verification code that unlocks the account.
Similar to SMS-based verification, out-of-band identity proofing can help a merchant quickly confirm the legitimacy of a customer.
5. IP Geolocation
Geolocation technologies can provide e-commerce merchants valuable information about their customers’ location and connection type, allowing them to confidently authenticate user identity without violating customer privacy. At a granular level, IP data can even accurately pinpoint the location of users at the ZIP code level.
E-commerce merchants can use this technology to peel back the layers of anonymity the internet brings, flag suspicious transactions, and better protect themselves against fraud and cybercriminals.
6. Machine Learning
While simple fraud prevention filters can be effective at reducing fraud levels, they’re also exceptionally vulnerable to savvy fraudsters who find ways around them.
For merchants wanting to employ a robust solution, using advanced artificial intelligence may be one of the most useful tools they can use in the fight against fraud. Not only can it help them reduce false declines and chargebacks, it can also improve the overall customer experience.
When combined with the manual reviews of a team of advanced fraud prevention specialists, machine learning can help e-commerce merchants quickly — and accurately — identify and stop the fraud signals that could compromise a business’s revenue and reputation.
7. Fraud Managed Services
Rather than trying to cobble together a series of fraud prevention technologies, a fraud managed services solution may offer a more comprehensive approach. Choosing a fraud partner with extensive industry and market experience can provide access to a team of fraud experts and the ability to look beyond superficial transaction details and instead see the broader patterns at play.
For more insight into how a managed services approach might protect your business and customers against credit card fraud, download our “Is a Fraud Managed Services Solution Right for Your Business?” e-book today.
