The Green Sheet Online Edition

December 13, 2021 • Issue 21:12:01

Combating fraud post COVID, 2021 and beyond

By Nicholas P. Cucci
Fluid Pay LLC

As digital transformation accelerates at an unprecedented rate, the ROI for credit card fraud increases in tandem. Fraudsters decide where to spend their time and resources the same way normal people evaluate the cost versus value of large, important purchases. As digital currencies and cashless societies spread around the globe, it's imperative to know the risks associated with new technologies that can directly impact your finances. Online payments have been booming for the past 10 years. COVID further accelerated this ecommerce/cashless boom.

Online payments are growing year over year; unfortunately, so is fraud. Here are salient statistics from Intuit and Experian:

• The most frequent payment method identified in total 2020-2021 fraud reports was credit cards.
• Credit card fraud was involved in 459,297 fraud and identity theft instances reported in 2020.
• People 30 to 39 years old reported the most instances of identity theft; those older than 80 reported the fewest instances of credit card fraud.
• Instances of identity theft by credit card fraud increased by 44.6 percent, from 271,000 to 394,000 in 2020.
• Identity theft involving new credit card accounts increased by 48 percent in 2020.

Why this matters to businesses

Why should businesses care about this? The possibility of fraud emerges if a merchant depends only on information provided by the user during the application process. There’s always a chance the information provided is fraudulent or even stolen. One way to avoid this is to authenticate the user with additional data the user provides. However, users don’t like to go through complicated processes and provide more information than the bare minimum. This can create another problem by increasing churn rates.

Merchants need a secure solution that doesn’t require lots of information from customers and can easily be embedded into workflows. Device identification is a potential solution because customers use devices for online processes. Used by services such as sales, advertising and fraud prevention, device ID assigns a unique ID to a device. This ID is used later when a user attempts to access a website or service. The ID is tracked across various user actions and transactions and enables the service to differentiate one entity from all other entities using the site or service.

Device ID is helpful for fast authentication of returning users, quicker workflows with less action required from users, and being able to detect and track suspicious and fraudulent behavior. However, as appealing as device IDs are, they alone are not enough to protect merchants and customers.

What you can do

Here are three other processes that can help protect customers and merchants:

• Authentication: This is the process of establishing the quality, uniqueness and validity of an end user’s identity within your fraud solution.
• Profiling: This compares the profile a consumer presents against known good and bad populations to determine if there is risk involved.
• Blocking: This refers to methods of using device identification to prevent high-risk activity and block the return of known bad customers.

Following are three profiling and blocking steps to take:

1. Decide on your strategy: Create rules for your customers based on your industry and their behaviors. (Such as IP velocity checks, account velocity checks, CVV and AVS.) Quite a few pre-rules, which would take effect before a transaction is processed, can be used.
2. Profile your customers: Examine transactions based on the rule sets you have created. Here you can see what will need to be adjusted. You may need to limit IP addresses to some degree. This part will help you determine a baseline for safe transactions.
3. Block the fraudsters: As bad actors come into play, this is where you can stop negative transactions before they are re-attempted—even when re-attempted on another of your merchant accounts. This is crucial to long-term success.

Nicholas Cucci is the co-founder and COO of Fluid Pay LLC and former director of marketing for NMI. Cucci is also a graduate of Benedictine University and a member for the Advisory Board and Anti-Fraud Technology Committee for the Association of Certified Fraud Examiners. Cucci was also named a Top 40 Under 40 by the Electronic Transactions Association in 2019. Fluid Pay LLC is the only 100 percent cloud-based Level 1 PCI payment gateway processing transactions anywhere in the world. Contact Nick at nick@fluidpay.com.

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