Fraud in electronic transactions is a growing challenge for businesses and consumers. To reduce these risks, there are advanced security tools that enable the detection and blocking of suspicious activities in real time. Solutions like multi-factor authentication, data tokenization, and transaction monitoring help identify unusual patterns and protect transactions.
In this article, we will examine how modules like Antifraud and Payments Limiter, available on platforms like afrus, implement these measures to strengthen security and provide an extra layer of protection in digital payments.
Types of Fraud in Organizations
Credit Card Fraud: Identity impersonation to make unauthorized transactions.
Phishing Fraud: Attempts to deceive people into sharing confidential information.
Refund Fraud: Transactions made with the intent to request a refund after a legitimate payment.
Chargeback Fraud: Users report transactions as unauthorized to recover the paid amount.
Mechanisms to Mitigate Fraud
Strong Authentication: Using two-factor authentication (2FA) to confirm user identity.
Transaction Monitoring: Real-time analysis of transactions to detect suspicious activities.
Blocking Suspicious IPs or Devices: Preventing transactions from unusual locations.
User Education: Instructing users not to share confidential information.
Afrus Modules for Fraud Mitigation
Antifraud Module: This module allows for real-time identification and blocking of suspicious behaviors. It uses advanced pattern detection algorithms to spot unusual transactions and prevent fraud before it occurs.
Payments Limiter: Allows for setting transaction limits based on various criteria (amount, frequency, transaction origin). This reduces fraud risk by establishing clear parameters on how, how much, and from where payments can be made, decreasing the likelihood of large-volume fraudulent transactions.
In this video, we explain how the antifraud system works on AFRUS
It is divided into two parts: the payment limiter and the form restriction.
The payment limiter detects potential credit card fraud, blocking users and IPs that make multiple attempts within a short period.
On the other hand, form restriction implements three levels of security, including CAPTCHA generation and temporary or total form suspension.
Constantly monitoring these systems is crucial to ensure the platform’s security.
Additionally, here is information on Visa and Mastercard fraud rules, which are useful standards to mitigate risks in electronic payment transactions:
Visa Fraud Rules
3-D Secure (3DS): Visa promotes the use of this authentication protocol to confirm the cardholder’s identity when making online purchases. Visa Secure (its version of 3DS) helps reduce fraud through multi-factor authentication.
Tokenization: Instead of sending the actual card information, Visa generates a "token" or substitute that protects sensitive data in each transaction.
Visa Advanced Authorization (VAA): This system analyzes transactions in real time to identify suspicious patterns, applying AI models to detect and prevent potential fraud.
Visa Account Updater (VAU): Keeps card information updated to avoid declines due to outdated data and reduce fraud attempts due to incorrect information.
Velocity Checks: Visa also applies velocity checks to monitor the frequency of transactions from the same user or card within a short period, helping to identify suspicious activity patterns.
Mastercard Fraud Rules
Mastercard SecureCode: Similar to Visa Secure, this is a version of 3DS that adds an authentication layer for online transactions to confirm that the purchaser is the true card owner.
Safety Net: This program monitors transaction activity to identify and block unusual fraud patterns on a global and regional level, helping to prevent widespread or targeted attacks in a specific area.
Mastercard Tokenization: Mastercard also uses tokenization to protect card data during transactions, reducing fraud risk in digital payments.
Real-Time Fraud Monitoring and Analysis: Mastercard implements real-time fraud controls that identify unusual behavioral patterns and trigger alerts or block transactions.
Chargeback Monitoring Program (CMP): If a merchant has a high chargeback rate, Mastercard takes action to enforce better security practices, and in extreme cases, may penalize or suspend the merchant.
There are highly sophisticated tools for fraud prevention, such as Cybersource. Cybersource is a payment management and fraud prevention platform that offers online security solutions for businesses. Using advanced technologies and connecting with multiple networks and banks, Cybersource helps detect suspicious activities, reduce fraud, and securely manage online transactions.
There are different types of solutions:
Fraud Prevention Solutions (e.g., Riskified, Signifyd, Forter)
Authentication and Fraud Prevention Platforms (Kount, IDology, iovation)
Payment Security Platforms (Stripe Radar, Adyen RevenueProtect)
Other Fraud Monitoring Services
Each of these platforms has a specific approach, and the choice depends on the business needs, the type of transactions processed, and the specific security requirements of the industry.
Fraud vs. Conversion Rate Implementing strict antifraud control measures is essential to protect users and the company, but it presents a significant challenge: impacting the transaction conversion rate. Below, we explain how this happens and why finding a balance is important:
False Declines (False Positives) A highly rigorous antifraud system may mistakenly identify legitimate transactions as suspicious, leading to unnecessary declines. This is known as "false declines" or "false positives."
False declines not only frustrate customers but also result in lost sales for the company. Users who experience these declines may abandon the purchase or take their business to another platform, negatively affecting the conversion rate.User Experience Friction Tools like multi-factor authentication or additional verification can add steps that, although necessary for security, make the purchase process longer or more complicated.
The more verification steps users face, the higher the likelihood they will abandon the transaction, especially if the experience is not fast or intuitive. This directly impacts the conversion rate.Impact on Returning Customers Returning and loyal customers may feel frustrated if they are blocked or subjected to excessive verifications with every purchase, despite a history of reliable transactions.
This can lead to reduced customer retention, as frequent buyers seek a smooth and obstacle-free shopping experience.Reduction of International Sales Many antifraud systems implement rules based on geographic location, which is useful for blocking suspicious activity. However, if the system is too strict, it could block transactions from legitimate customers in locations with different purchasing patterns or foreign IP addresses.
This limits the company's ability to capture and retain international customers, potentially reducing conversion in foreign markets.Manual Review Costs If an antifraud system flags too many transactions as suspicious, manual review may be required. This increases operational costs and delays transaction processing, affecting the customer experience.
This delay may lead some customers to abandon their purchase, again impacting conversion.
The Ideal Balance: Security Without Sacrificing Conversion To maximize conversion while minimizing fraud, many companies seek a hybrid approach that combines:
Customized rules tailored to each customer’s behavior.
Risk segmentation to adjust the verification level according to each user’s profile and history.
Continuous monitoring and adjustments in antifraud systems to ensure that controls are not overly restrictive for legitimate transactions.
Implementing antifraud measures is crucial, but true success lies in balancing security and conversion to maximize sales while protecting both the customer and the company.
In conclusion:
Fraud prevention in electronic transactions is essential to protect both companies and users in the digital environment. Thanks to tools like multi-factor authentication, tokenization, and real-time monitoring, it is possible to identify and block suspicious activities before they cause harm. Solutions like the Antifraud and Payments Limiter modules on specialized platforms strengthen this protection, providing confidence and security in every transaction. As e-commerce continues to grow, implementing these antifraud measures becomes increasingly important to mitigate risks and preserve the integrity of digital payments.