The Risks of Selectively Screening Transactions

Should My Fraud-Management Solution Screen Every Online Transaction?

When the focus is on individual cases and not the larger pattern, preventing large-scale fraud attacks becomes difficult.

I want to know more

Screening transactions for fraud requires businesses to find the right balance.

Should you screen each and every transaction that passes through your e-commerce portals...

icons

or should you flag only those that appear fraudulent?

icons
Woman thinking

When businesses opt to use artificial intelligence (AI) strategies to “cherry pick” only the transactions that appear fraudulent, they assume several risks.

Cyber criminals are smart – and they’re relentless. They’re always testing your fraud prevention system.

Let’s look at the PROS and CONS of selectively screening transactions

The Risks of Selectively Screening Transactions

Changing the face of fraud

Changing the face of fraud

Traditional AI-based strategies may be unable to detect emerging fraud patterns.

When fraudsters evolve their tricks and AI rules can’t keep up with the changes, the merchant’s fraud management is rendered ineffective.

Systems may misjudge fraudulent transactions that appear legitimate.

Rejecting too many transactions

Rejecting too many transactions

A lower fraud rate may actually reflect a high turndown rate that can negatively affect a merchant’s reputation.

Playing the system

Playing the system

A lower fraud rate may actually reflect a high turndown rate that can negatively affect a merchant’s reputation.

Complicated fraud filter management

Complicated fraud filter management

Merchants often use multiple rules in their fraud filter to flag as many fraudulent transactions as possible.

But counterintuitively, this can increase risk exposure. If the merchant isn’t careful about this order in which rules are applied (which rule is applied first, second, etc.), it’s possible that some rules may cancel out others, which can leave the merchant less protected than before.

Missing the big picture

Missing the big picture

Handling transactions individually may cause merchants to overlook the bigger picture. For example, the purchase of one PC delivered to Cherry Lane seems legitimate.

But if the merchant is not screening every transaction, he might not realize that 10 PCs were delivered to different addresses on Cherry Lane — all around the same time — which could indicate a fraud attack.

The Advantages of Screening Every Transaction

Screening more transactions helps you develop the bigger picture.

Screening more transactions helps you develop the bigger picture.

As you screen more transactions, you increase the amount of stored transaction data you have to draw on, so more accurate decisions can be made across the board.

Consider our example from the previous video, with the PCs shipped to Cherry Lane; each individual sale may look innocent, and the true fraud pattern only emerges when the transactions are viewed together in a broader context.

Low value can still mean high risk

Low value can still mean high risk

Fraudsters often make low-value purchases just to see if a stolen credit card number works. If it does, that opens the door to larger fraudulent purchases.

Screening every transaction lets you see the small transactions that are testing the fraud waters — transactions you might otherwise ignore.

Questionable transactions can be more closely evaluated

Questionable transactions can be more closely evaluated

Some transactions will always fall into a gray area, where it’s simply hard to tell if they’re fraudulent or not. Fraud management systems that rely solely on AI will automatically decline all of these transactions.

But if you have a system to research and analyze these transactions, you’ll most likely find that some of the gray area sales are good and should be approved.

Prevents large-scale fraud attacks

Prevents large-scale fraud attacks

Professional fraudsters often work together to coordinate attacks on a company in a very short time period.

If a company individually assesses orders, it’s like pouring cold water on a fire; attacks can be more quickly identified, stopped and prevented.

You’re watching for them

You’re watching for them

Because fraudsters will recognize that you’re watching for them, they’ll pack up and move on to another business that isn’t as prepared.

Logo Clearsale

This onslaught of fraud doesn't stop.

Every day, cyber criminals are trying new tactics to get past your fraud filters. All of this is going on every day.

I want the best fraud protection