Fraud Prevention & Screening Filters in Payment Gateway

The essentials

In 2023 Card Schemes Visa/MasterCard have lowered maximum Fraud thresholds to below 0.3%, making it essential for any eCommerce merchant to implement anti-fraud measures. Combatting the ever-growing numbers of card and data breaches around the globe should be a top priority for every business accepting online (card not present) payments.

For example, in certain cases fraudsters holding stolen card data may complete purchases on your website. As an unsuspecting merchant, you may deliver the product before the fraudsters open a dispute and request a reimbursement (chargeback). You may be left without the product and without payment. In addition, the payments provider or acquiring bank will learn about the fraud and may terminate your merchant account on account of your breaching specific chargeback thresholds. You'll be put on a blacklist, meaning no chance for applying for a new merchant facility with other banks.

Source: fico.com

Losses in the Billions
In Europe, losses due to fraud reached approximately 1.5 billion EUR in year 2021. In 2020, France, Poland and Germany experienced €6M, €5M, and €3M fraud loss increases respectively, yet in 2021 France held a flat trend but Poland and Germany saw increases for a second consecutive year, with €0.5M and €2.4M fraud loss increases, respectively. The Netherlands experienced the highest losses in terms of relative value, coming in with a loss increase of over €8M.
European Fraud Map (fico.com)
Card Fraud in the UK (2017 FFA UK)

Standard Checks

Card Verification Code

Everyone is familiar with a 3-digit code printed on the back of the card. It was one of the first security measures introduced with rise of fraud in online payments. Payment Card Industry (PCI) compliance standards do not allow merchants to store CVV codes, therefore in the event of online card data being stolen these codes will not be obtained by the fraudsters.

3D Secure v2

The process involves a redirect to cardholder's issuing bank website (or mobile app, SMS, etc..) during the checkout process, where cardholder needs to authorize the transaction. 3D Secure 2.0 was introduced to raise security and at the same time improve shopper's experience and avoid redirects in some cases.

Expiry Date

Although seemingly obvious, the required entry of a card’s expiry date is still an important tool to verify the card. Typically, the card issuers set an expiry date of up to 3 years.

Address Verification

Only supported within UK, Address Verification Service is used to verify the address and postcode, as entered by the shopper, with the proof of address that card issuer has (the address to which card statements are sent).

Optional extended checks

Velocity controls

Velocity checks are based on shoppers’ purchase attempts within a certain period of time. For example, if a would-be customer tries to place an order 3-5 times in a row, with each unsuccessful attempt, further attempts will be blocked.

BIN country match

The first 4 digits of a card number (BIN code) reveal it's issuing bank/institution name and country. If the actual location of an online shopper (IP country) is different than the BIN country, the transaction will be flagged or blocked.

Name changes

A customer’s name, address and email are compared across the entire payment gateway database. Excessive changes - for example, if the card number has been used in the past with other names or email addresses, the attempt will be blocked.

Blacklists

Any card numbers or other details, such as a cardholder's name/address, which have been flagged in the past and put on the ‘blacklist’, will be blocked by a fraud scrub filter automatically. This applies on a global scale on gateway services for all merchants.

Free email accounts

Statistically, fraudsters attempting to process stolen cards online will most probably use a free email account. If such an email address is detected, the fraud filter will give it a higher fraud score, indicating a possible fraudulent transaction.

Unusual activity

A combination of excessive changes to submitted details, usage of different card numbers or payment methods, repeated payment attempts or general suspicious activity will raise a user’s fraud score, giving the merchant the option to reject such a transaction.

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