Anti-Fraud for Alternative Payment Methods

Anti-Fraud for Alternative Payments The vast majority of e-commerce transactions are made using credit cards — no doubt! It is also where most fraud occur, especially in high risk markets. Merchants in online gaming, dating, and others, tend to offer alternative payments: cash equivalent, phone carrier based, online wallets, etc., as an option when the user is either underbanked or poses too much of a risk. It is becoming more common to see some merchants in these industries ONLY offering these payment methods, that way they don’t have to deal with the hassles of chargebacks. They do this in spite of knowing that they are  loosing by far a much larger customer base — the one that uses credit cards.

This doesn’t mean that alternative payment methods don’t suffer from fraud, they do!, but the merchants don’t have to deal with the chargeback management, fines and extra fees. 

For those merchants that offer a blend of payment methods, it is important to understand that fraudsters will use every avenue available to them. They would try to take advantage of every payment method.

How the Fraud Scheme Works

A couple of weeks ago we were discussing with one of our partners how fraudsters were abusing one of these alternative payment methods. This particular method has a built-in two-factor authentication mechanism, one would think it would deter fraudsters. However, the fraud scheme works like this:

1. Fraudster would use stolen payment instrument from victim
2. Fraudster would trick victim into given fraudster the authentication token generated by the merchant to confirm the purchase.
3. Fraudster would be able to perform transaction with victim’s authentication token

All of this in near real-time.

IdentityMind: Anti-Fraud Protection using Any Payment Method

We quickly figure out the right way of protecting the merchants and the victims by understanding the inherent security mechanisms of the payment method in question, and creating rules that would basically monitor the correct behavior of the mechanism with regards to the parties involved.

As alternate payment methods evolve and become more prevalent, merchants will adopt them more and more. Merchants need to be prepared for performing anti-fraud that is applicable to each payment method, and be aware that fraudsters may try across different payment methods. Merchants will benefit from keeping track of what type of customers use which payment method, and associate their anti-fraud techniques with customer profiles.

Our Anti-Fraud platform covers many payment methods including credit cards, ACH, Bitcoin wallets, PayPal wallets, and many others. It tracks identity profiles across payment methods and shares payment reputation regardless of the payment method being used. It understand fraud aspects that are unique to each payment method when these are available, and monitors and alerts when these are used outside its intended model.

Are you experiencing fraud with alternative payment methods? Contact us now for a free consultation.


    Jose Caldera

    Jesus Giraut

    September 27, 2013 at 6:21 am Reply

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