10 Features of the Best Online Fraud Prevention Tools
Online business transactions have become commonplace in our society. No longer is it necessary to visit the local mall to purchase items, or even wait for mail orders – today one can shop 24/7 from their computer. This convenience brings with it additional risk as consumers seek out better deals and discounts on products they might not otherwise have been able to afford.
Unfortunately, this also attracts criminals whose goal is to exploit these vulnerabilities. In order to protect their business from being victimized by online fraud, companies must have a comprehensive anti-fraud solution in place.
In today’s article, we will understand what is an online fraud prevention tool and review 10 characteristics of the best online fraud prevention tools:
What is an online fraud prevention tool?
An online fraud prevention tool, also known as an anti-fraud solution, is a technique used to identify and prevent fraudulent transactions. Depending on the company using it, such techniques can vary widely in complexity and effectiveness.
The online fraud prevention tools allow companies to detect unusual transaction patterns which could indicate instances of fraud. Such patterns include:
- Multiple simultaneous transactions from the same IP address,
- The use of an IP proxy or anonymizer service to conceal a user’s location,
- A high volume of transactions over a short amount of time, and many more.
Therefore, when trying to decide on an anti-fraud tool for your business it is important to find one with as many features as possible.
Here are 10 features you should look for in online fraud prevention tools:
1) Recognizing Indicators of Fraud via Machine Learning
2) Real-time Alerts without False Positives
3) Implementing Behavioral Analysis
4) Offering Mobile Device Protection
5) Working with Merchants to Prevent Fraud
6) Providing Multi-Channel Protection
7) Using Multiple Data Sources
8) Ability to Spot Unusual Activity in Real-Time
9) Comprehensive Reporting Capabilities
10) Easy Integration with Payment Gateways and Systems
Let’s understand each aspect in detail:
1) Recognizing Indicators of Fraud via Machine Learning
One way that online merchants protect their business from fraudulent transactions is to identify the “red flags” which typically signal a consumer’s intent to commit fraud. Many times these can be identified by patterns in aggregated transactional data. Using machine learning, a company is able to create algorithms that interpret these patterns and can then use them to identify similar transactions.
The end result is a system that has the ability to pick up on subtle changes in behavior (e.g. abnormally long requests for information) and alert merchants before a transaction occurs. This allows companies the opportunity to intervene, preventing loss of revenue due to fraud.
2) Real-time Alerts without False Positives
When choosing an anti-fraud solution, it is important to look for providers who are able to provide real-time alerts rather than waiting until the end of a session before informing you of suspicious behavior. A system that provides this level of protection offers little chance of fraud occurring before action can be taken.
3) Implementing Behavioral Analysis
Today’s sophisticated fraudsters are able to mimic the online behavior of a legitimate consumer, making it difficult for anti-fraud systems to detect improper activity. One way to combat this is through “behavioral analysis,” which typically means keeping track of consumers for extended periods of time and monitoring their transactional patterns and activity online.
Merchants who do this are able to distinguish between legitimate and fraudulent transactions, allowing them to terminate the latter without any impact on genuine shoppers.
4) Offering Mobile Device Protection
As consumers increasingly turn to their mobile devices for researching and purchasing items, merchants must be able to recognize when these transactions are at risk. By using a real-time anti-bot solution that can monitor in real-time both online and mobile channels (a multichannel approach), companies can more accurately and quickly identify and terminate a potentially fraudulent activity.
5) Working with Merchants to Prevent Fraud
In order for an anti-fraud solution to be effective, it must also incorporate a proactive rather than reactive approach. This means that companies need to work closely with merchants in order to provide them with the tools they need to detect and protect themselves against fraudsters – before they have access to sensitive information or products.
6) Providing Multi-Channel Protection
In order for merchants to be able to spot fraudsters, anti-fraud systems must have the ability to monitor multiple channels. This means that a solution must be able to flag suspicious behavior across all online and mobile channels. As a result, not only will merchants be able to detect potential fraud before a transaction occurs, they will also have the ability to see where the fraudulent activity occurred within their system.
7) Using Multiple Data Sources
Data is the key ingredient in any anti-fraud system. For this reason, providers must ensure that they have access to multiple data sources and be willing to work hard to make sure every aspect of a transaction is captured. This should include gaining access to consumers’ personal information (e.g through customer registration forms) as well as other pertinent data (e.g IP addresses, geolocation).
8) Utilizing Machine Learning and Artificial Intelligence
The more a merchant can feed into a system to make it smarter, the better the anti-fraud solution will become. The use of machine learning and artificial intelligence enables companies to harness large amounts of data – including both historical and real-time transactions – and use it to improve future decision-making. This, in turn, results in optimal protection against all types of fraud.
9) Comprehensive Reporting Capabilities
The best fraud prevention tools should also include comprehensive reporting capabilities. This should not only provide merchants with alerts about potential fraud, but it should enable them to drill down into these alerts in order to get specific details. This information could be used for internal fraud investigations or to cooperate with law enforcement agencies when the need arises.
10) Easy Integration with Payment Gateways and Systems
In addition to being able to spot fraud, a solution should also help merchants by making it as easy as possible for them to integrate with their existing infrastructure. This includes integrating seamlessly with payment gateways and other online business solutions. The easier this process is, the more likely companies will be willing to adopt new technology rather than going back to “security by obscurity.”
Final Thoughts
As the online market continues to grow at an exponential rate, merchants cannot afford to ignore fraud. But rather than playing a never-ending game of cat and mouse with would-be criminals, companies need to implement the use of the best online fraud prevention tools that enable them to spot suspicious behavior in real-time.
By doing so, merchants will not only be able to better protect customer data and prevent online fraud, but they will also be able to devote their time and energy to safeguard the business. As a result, it is important for companies to understand what makes an anti-fraud tool effective before committing the necessary resources.
