Fraud scoring for transactions is a powerful tool to help you automate the fraud detection process and avoid losing money to fraudsters. This involves comparing the data of a transaction to models of fraudulent behaviour, and assigning a risk score to each one based on how closely it matches those patterns. This allows you to approve or decline transactions that don’t meet your risk threshold.

The key is to have a lot of different indicators — things like the customer’s billing and shipping addresses, their device IDs, and their IP address locations — that all work together to create a complete picture. So, when a suspicious pattern comes up, such as a new customer with a different email address or a large purchase made in a country outside your usual territory, it will raise more flags and generate a higher fraud score. This will trigger an alert and, if it goes above your risk threshold, your system can automatically decline the transaction for you.

Fraud Scoring for Transactions: The Key to Secure Online Payments

Fraud scoring isn’t a foolproof solution. For example, it may not be able to identify friendly fraud, which occurs when a legitimate customer disputes a charge with their credit card company, and this results in the merchant having to reverse the original transaction. But it can be used to flag suspicious behaviour, and you can use it to add extra authentication steps for certain transactions, such as a one-time password or a biometric scan. This will also make your business more efficient, allowing you to scale and grow without the time-consuming burden of manual review.