Gain Key Business Insights and Prevent Fraud Using Fraud Data


Retail businesses have had to close their brick and mortar locations due to stay at home orders and lockdowns imposed by public health authorities to slow the spread of Covid-19 in communities across America. Business owners are turning to e-commerce in order to maintain some business continuity and continue to serve their customers who are also on orders to stay home and slow the curve. The increase in e-commerce carries with it more exposure to fraudulent activity.

In the past year, stay-at-home orders and concerns about health have converted staunch in-person shoppers into online consumers out of necessity. The surge in online purchases have made it necessary for business owners to evaluate their ability to detect and prevent fraud online to protect their business and customers.

According to PwC’s 2020 Global Economic Crime and Fraud Survey, among 5,000 respondents, 47 percent experienced fraud in the past 24 months, adding up to an estimated $42 billion because of fraudulent activities. On average, companies reportedly experienced six incidents in the last 24 months, according to the survey.

If you are an online merchant, examples of suspicious behaviors indicating potential fraud include:

  • Different billing and shipping addresses
  • Notably large orders
  • Several orders containing the same item
  • Several orders paid for with different credit cards going to the same address
  • International orders at a business that rarely or never receives them

It is important to note that these red flags are not surefire fraud detection markers. There are plenty of reasons why a customer making an honest purchase may feature any of these warning signs. 

Taking A Closer Look At Fraud Losses

It’s difficult to accurately quantify the true cost of fraud. In addition to the financial losses a business might take– direct losses, fines, penalties, and remediation–, business owners must also consider wider ranging and potentially longer lasting damages as well. The damage fraud can do to your brand, consumer trust, and employee morale can have long term ramifications for your bottom line.

As such, merchant vigilance in preventing fraudulent transactions is reasonable and necessary. However, it is also very easy, particularly in this already fraught climate of uncertainty, to overreact and deny legitimate transactions that produce a “false positive”. In addition to losing a sale, you might potentially lose a loyal customer and run the risk that their negative experience will deter the people they have shared this story with. 

It’s important to find the right balance between security and experience. When there are too many steps to finishing their transaction, customers will abandon their shopping card on your site in lieu of a more straightforward alternative. 

Preventing Fraud Through Data

If you have ever used your credit card on a spontaneous trip away, you have probably run into a situation where your bank has frozen your credit card until they are able to verify that you are the one actually making the purchase. As inconvenient as this is, it also gives card holders and business owners peace of mind, and this peace of mind is made possible thanks to data.

The use of data mining and machine learning have been invaluable in not only improving the accuracy of fraud detection and prevention but democratizing access to these powerful tools. Data mining works by scraping large amounts of data from available sources and running it through a program which will learn patterns, detect anomalies, and flag them.  

To detect fraud, machine learning algorithms create a picture of a card holder using data points. These data points first sketch out a rough outline based on contact information, location, and IP address among others. Further data points add detail to create a more rounded picture of the person’s habits using their purchase history, spending patterns, income levels, and other factors that influence their spending decisions.

The more data points attached to a person’s digital identity, the lower their risk is for falling victim to online fraud. All of the data that is gathered is analyzed and can be used predictively to determine trends and recognize deviations in usual habits. These deviations can indicate that the credit card or account has been compromised– or that the cardholder spontaneously and uncharacteristically booked a weekend trip away.

A robust fraud prevention system can deter cybercrimes against your business and save you money from chargebacks and unnecessarily declined orders. As a small business owner, it’s important to take action and protect yourself and your customers.

To learn more about Fraud Detection and Prevention solutions, contact Sekure today.

Social feed


Free access to our industry leading information to help you make informed decisions for your business.