Everything You Have to Know About Fraud Management

Everything You Have to Know About Fraud Management

Sandra Wróbel-Konior

Content Marketing Specialist at SecurionPay

Content Marketing Specialist with a tech-savvy personality, experience in writing and passion for reading. Staying up to date with the latest social media trends, in love with GIFs.

Views 766

Everything You Have to Know About Fraud Management

03.08.2016 11:30 am

Fraud can happen anywhere in the eCommerce world. It doesn’t matter if you’re running a small online business or are an owner of a retail chain. Technology developing and eCommerce market growth are incentives for fraudsters to find new ways of hacking into the market. It’s hard to estimate the true scale of fraud in business, but it’s a serious issue. Read this post to find out how you can prevent fraud.


The LexisNexis True Cost of Fraud report shows that the average value and volume of fraudulent transactions has risen since 2015. The truth is, it’s unstoppable so merchants should keep in mind that they might face fraudulent activities.

Fraud isn’t only related to monetary loss, but can also harm your reputation and brand image. Online business owners need to prepare for fraudulent activities so they can detect and prevent them. Is it possible?

What is fraud? – A short definition

Fraudulent practices are growing with the increased use of online credit cards and is mostly done against consumers. Fraud comes in many forms such as unauthorized transactions, fake requests for a refund, using the service without paying the due amount, etc.

Fraud is made for personal gain and comes with unauthorized and illegal benefits. It’s almost impossible to prevent fraud when technology is developing so fast. Anyone on the internet can be anonymous and there is no need to be physically present when you authorize payments. There are credentials used to identify users but it doesn’t take a technical expert to realize an identity can be stolen. It’s really about having adequate protection. If it’s done correctly, your payments will be secure and if not, the fraudsters can do harm.

To learn more, see: What is a payment fraud?

What are fraud detection methods?

While eCommerce business owners need to manage fraud, they also have to face customer trust and loyalty loss. It’s crucial to have a fraud management plan or to choose a payment provider with highly effective anti-fraud tools.

Anti-fraud services such as data analysis have been used for years to detect fraud. It’s time-consuming and needs comprehensive knowledge in finance, economy, law, and more. Fraud activities may be similar, but are rarely identical. We now also have artificial intelligence so data processing can be more advanced.

There are many fraud detecting methods such as data mining, time-series analysis, calculation of statistical parameters and matching algorithms to detect anomalies.

Fraud detection solution comes in a few stages. The first stage is to prevent fraudulent activities, which is connected to risk management. If a potential fraudulent behaviour is identified, it’s time to start the back-office process. The last part of fraud detection is analysing the data to predict new scenarios and fraud methods.

Benefits of Fraud Management

As you can see, the whole process requires highly effective data mining techniques. If you care about your business credibility and customers’ security, fraud management is a must. It comes with several benefits. Some of them are:

  • When you offer customers an anti-fraud system, your brand awareness increases and there’s a greater value attributed to the services you’re providing.
  • The number of non-identified transactions decrease, which result in lower costs related to credit recovery.
  • All the benefits listed come with increased revenue and increased customer retention.


In all, there are many ways merchants can lose customers while trying to catch cyber-thieves. According to a LexisNexis study, top challenges when selling merchandise through online or mobile channels are verification of customer identity, delay in payment confirmation, and confirmation of package delivery.

True cost of fraud

Source: LexisNexis True Cost of Fraud report

How to Prevent Fraud – Tips for Merchants

Cyber-criminals can make a lot of money in the online market so it’s almost impossible to prevent their attempts of stealing money from credit cards. However, there are some warning signs you can focus on to minimize the risk of being hacked. Here’s a list of what you can do to prevent and lower the risk of fraud.

1. Monitor

Check your business orders closely. The best way of doing this is to monitor every order before shipping them and it takes time. Pay attention to the shipping address. If it’s different from the billing address or looks weird, you can cancel shipping the order. You can also request the issuing bank to get in touch with the customer. Online thieves often give bad phone numbers that don’t match with credit cards they use to make an order.

Another indicator of fraud is an IP address from outside the country. Of course, this doesn’t always mean an order is connected with fraudulent activities. Be certain before you accuse a customer. If you have any doubts, contact the customer to confirm that they actually ordered the product.

Another thing to watch closely is repeated attempts to order an item or service on the same card.

It’s normal for you to be worried because determining if a customer is fraudulent may cost you a legitimate customer who will never return to buy something from you.

2. Require a signature

You should always ask for a signature upon delivery. Just to make sure the order was delivered and in good hands.

3. Be careful with international orders

When selling globally, you need to check orders twice. This is especially true when shipping to Asia or Africa as they are countries with higher instances of fraud. Slow shipping and a lack of shipping options can also be obstacles for customers. The speed of delivery really matters for online shoppers, who are usually impatient and want to receive their order as fast as possible.

4. Focus on time of ordering

eCommerce comes with a 24/7 experience and therefore it’s natural that people may buy online at any time. You should especially monitor late night and early morning orders. This is because fraudsters often make purchases during this time period.

The same can be said with express shipping. It’s one of the common shipping methods chosen by fraudsters because they don’t have to worry about the shipping cost. They also often make costly orders in high quantities.

5. Check e-mail addresses

Strange or “cute” e-mail addresses should set off alarm bells. Again, it doesn’t mean that every ridiculous email address is going to be suspicious. Usually, a person’s e-mail address will match with their name. But when you see something like Iamfraudster@somedomain.com, think twice before shipping the product.

You also need to be careful of the anonymous e-mail services. Thieves are more likely to use this kind of e-mail providers because they don’t give personal information to the police or merchants.

6. Choose the right fraud protection service

These fraudulent transactions are not easy to detect, so highly effective anti-fraud tools are necessary. There are many companies that specialize in fraud management. If you are a merchant that processes payments on your website, you can provide highly effective anti-fraud protection by choosing the proper payment gateway. You also don’t need to worry that much because the provider takes on the responsibility of preventing fraud.

Don’t forget to update your network security systems in order to ensure that all the sensitive information is safe. You can also encrypt transactions and e-mails with important data for extra security.

You can even go a step further and create a database with fraudsters who make orders at your online store. Moreover, set a network with other merchants in your industry and share the information with each other.

You’ve been Scammed – What to do next?

Even though you did your best to protect the purchases, fraudsters were too witty. What now? Don’t panic because that definitely doesn’t help. Then, take the following steps to solve the problem.

Prepare the documentation. Everything connected with the order could be useful, so pull together all the details including the cardholder name, card details, billing address, e-mail, date of order, date it was sent, etc. You also need to find the shipping address. It could be a company physical address or deserted house, but even though you can ask the police to establish an investigation on that location.

Remember I told you to ask for the signature? You can check who signed for the delivery and it could prove essential for the case.

The next step is to inform the local police and go over the address where the product was shipped. It could help, but sometimes the police will not go further in the investigation, especially when it was a low-cost order.

In recent years, the greatest concern with fraudulent transactions comes from mobile devices. This is because many merchants still don’t have effective security management systems. The best solution is to invest in a system that automatically flags suspicious transactions and combines it with multiple fraud mitigation services. Using many solutions together improves your chances of not getting scammed. It’s also good to provide manual reviews to strengthen the verification process.

Do you provide highly effective fraud protection to keep your business safe?


Latest blogs

Domenico Scaffidi Volante Technologies

SWIFT gpi: the Build vs Buy Debate

As the world moves towards a more global way of doing business, banks and financial institutions need the capability to move money around efficiently, transparently and in a cost effective manner and in doing so, ensuring that liquidity doesn’t get Read more »

Eric Liebman Ingenico ePayments

How Consumer Demand is Shaping the Future of Travel Payments

Customer centricity has always been at the heart of travel businesses. But it is essential that businesses keep pace with both technological advancements and the evolving consumer demand as innovation in the sector is rapidly transforming the Read more »

Sascha Ragtschaa WeOwn

LSE/Primarybid Deal is Like Putting Lipstick on a Pig

Levelling the playing field for retail and institutional investors is a step in the right direction, but it’s too little, too late in terms of engendering real change. Investing in new interface technology without addressing fundamental issues with Read more »

Thomas Pintelon Capilever

Can banks help to fundamentally redefine our notion of trust?

Trust is the glue that holds society together. Historically we trusted people in our local community. Later this evolved to a centralized trust in large corporations and institutions, but recently this has shifted towards a more distributed trust, Read more »

Alan Koenigsberg Visa Business Solutions

Rising to the Global B2B Payments Challenge

In today’s fast-changing business environment, international organisations all over the world increasingly expect global access to finance in real-time. They also expect finance to be available in a way that works for them in any currency and Read more »

Related Blogs

Nicolas Muhadri StreamMind

The rise in bank transfer fraud: can you afford to lose out?

As digital transformation continues to proliferate, financial services players, such as banks and financial institutions, would be wise to look to key technology providers in the industry, in helping them navigate these potentially challenging new Read more »

Jayaprakash (JP) Kavala CustomerXPs

Customer Liability In The Age Of Digital Banking

Who is liable for money lost when fraud occurs in a customer’s bank account or card through illegal access/use of ATM or any of the Digital Channels (Internet Banking, Mobile Banking, Payments, E-wallets, etc.)? Read more »

John Aranowicz CustomerXPs

New Department: Financial Crimes Department

If you have ever shopped on Amazon.com or ordered a movie on Netflix, you most likely have experienced “Predictive Analytics”. The accuracy and the speed of predictions and recommendations are very impressive. Amazon knows that buying one item makes Read more »

John Marsden Equifax

FFA UK Stats Show 25% Increase in Financial Fraud - Equifax Comments

Cyber and ID fraud dominate the fraud landscape, and online scams and attacks continue to rise. E-commerce is growing, and is a tempting prospect for fraudsters looking to use identity and payment data such as credit and debit card information they Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel