How Fraud Detection Starts With Payments

Discover how online payment fraud detection impacts merchants and the importance of payment fraud detection systems

eCommerce businesses of all sizes face the reality of the need to prevent fraud and implement effective fraud management systems.

Merchants operating in the eCommerce space have most of the payment fraud come in the form of chargebacks. The downside of chargebacks is financial loss from the transaction and the operational costs required for employees to receive and process the chargebacks and additional fees because of processing the chargeback.

Introducing the top four holistic payment fraud detection systems

Fraud prevention is a complex problem to solve and requires a multi-layer approach. Here are the four holistic fraud systems to consider:

Tooling and Data

Data is the centerpiece of any solution to monitor performance or implement detection tools. The feed of data to detection systems is vital to the effectiveness of the tool. Data ranges across a wide array of categories like customer history, device intelligence, identity, session telemetry, and so forth.

Detection Tools

The sophistication of detection tools has a wide range from simple rules to a complex machine learning model capable of taking in thousands of data points to evaluate an event. One key point to remember about detection tools is they determine both the good and bad activity to reduce friction and enhance the customer experience for the good events.

Actions

The action taken with good or bad activity varies depending on the event type, the confidence level of detection, and the risk of the event. Imagine you go on vacation and need to buy a gift to ship to your cousin from a hotel computer. What happens is the merchant website you make purchases from will not recognize the new device and the location you are using. A few different actions come to mind in this instance: should the merchant shutdown your account forever to prevent a potential bad purchase? Or should an additional authentication step occur to confirm your identity?

Checkpoints

How can you determine where in the customer journey to detect an event and act on it? In eCommerce, the reality is natural moments occur around ‘submit’ or ‘buy’ buttons. These checkpoints are the final point at which a negative event can be prevented when a customer is finalizing actions like completing a purchase or changing their profile.‍

A payment orchestration platform for online payment fraud detection

All merchants need a payments orchestration platform that offers a centralized, single integration to access multiple payment services, such as network tokenization, vaulting, and access to multiple PSPs to accelerate global payment performance. Spreedly delivers and orchestration platform including online fraud prevention vendors like Forter and Kount.

The core component of an effective online fraud system is a third-party vendor playing the role of the detection system. With Spreedly, the orchestration platform can store a gigantic amount of data on the payment method and the transaction details being shared with the PSP can move seamlessly with a fraud provider without the merchant participating in any additional work.

If you must stop a transaction before an authorization attempt or if voiding an authorization is necessary when the fraud prevention layer detects high risk activity can be customized, built in, and automated in the orchestration workflow. Merchants save time and reduce operational costs to minimize risky payments to drive payment performance.

Spreedly’s natural flow of payments deliver built-in checkpoints in an orchestration workflow so these detection capabilities can occur. In important moments such as pre-authorization and post authorization, these are common in the industry and already exist in the orchestration workflow so there’s no need for merchants to create additional workflow steps.

Finally, the data and tooling are taken care of in the orchestration flow for both send and receive. The existing data is shared with the fraud prevention provider with minimal effort from the merchant with the orchestration workflow seamlessly closing the loop on transaction data. Spreedly ensures the result of authorizations or receipt of disputes are in an automated loop from the orchestration platform to the fraud prevention provider for any future training and new development of models. Each data point gets returned to the merchant for their internal tools and is aggregated across PSPs in the orchestration platform to maximize their payment fraud detection system.

The importance of payment fraud detection with Spreedly  

At Spreedly, the tools in our orchestration layer are designed to allow the right transactions through and capture more revenue. Our comprehensive solution integrating fraud and 3DS management in a single API call for end-to-end performance can integrate with as many or as few gateways as you need, as well as unlocking 3DS optimization, minimizing friction by only using 3DS when its truly required.

Connect with Spreedly now to see how you can implement the leading fraud protection tools.

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