Fraud Prevention Best Practices 101



Effectively managing your merchant account and payment processing requires an understanding of how to prevent unwanted transactions from taking place as we’ve discussed in other articles so far. There is no single solution that will solve all of your problems, there is no, “Silver Bullet” as it’s called within the payments community. If you work in a higher risk industry you may need to work with a specialized processor that can reduce risk, underwrite and mitigate the potential issues associated with your transactions. This is also not to say you need to continually implement the best and most cutting edge solutions that come to the market, doing so may actually be a hindrance to business due to implementation and ramp up requirements.


Best Practices for Fraud Prevention Management


The suggestions outlined below are best used for “true fraud” as opposed to “friendly fraud”. Friendly fraud (which is silly that it’s even called that) is much more insidious and difficult to catch primarily because often times it’s the actual card holder making the transaction and then disputing the charge as if it was unintentional.


  • Find a balance of staying up to date with industry trends and technology, but don’t jump on each and every new product that comes to market. Should you wish to implement a new service, ask to speak with existing clients to get a real world view of how the product or service is working for their business (this becomes even more valuable if you’re able to speak with someone in a business similar to yours)
  • Do not rely on a single fraud prevention method to keep you safe. Having a suite of systems or checks and balances that compliment each other will ensure back up in case one of the primary rules fails to catch a fraudulent transaction.
    • Note: E-Commerce fraudsters are intelligent and grow more knowledgeable as time passes. Make sure you’re continuing to track and monitor your system and rules to ensure effectiveness.
  • Leveraging the tools and services that are inherent with the most common payment methods is an important part of preventing fraud without breaking the bank. While the card based security measures are not the end all be all to preventing unwanted transactions, they do have their use. Research and become familiar with what’s available for each of the payment options you offer.
    • Note: Fraud activity and methodologies can differ from payment option to payment option. Don’t consider that the prevention tools and parameters used for credit cards will be as effective for ACH, PayPal or other payment options.
  • Review, review review! Having a firm grasp of the activity taking place on your site is really the first step to being able to prevent fraud. Without knowing the specifics of the negative activity taking place you’ll be unable to stop it from transpiring in the future without possibly reducing the number of positive transactions which are taking place.
  • An often used concept of fraud prevention professionals is to put themselves in the shoes of a fraudster. Review your site as if you were going to attack it and try and make a transaction with a stolen credit card. By doing this you’ll be able to eventually find the cracks in your fraud prevention and sure them up with new rules, alerts or other prevention methodology.


Much of what’s discussed when fraud prevention is brought up is how to prevent the unwanted transactions, which of course makes sense. However, when viewed from another perspective fraud prevention techniques and practices should also be able to increase the valid transactions taking place on the site. We’ll go into this further in another section, “Making Fraud Prevention work for You”.







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