The 5 Best Risk Management Tools for Transaction Fraud

The pandemic has greatly accelerated digital transformation and the rise in fraudulent activity. It doesn’t matter if your company is B2B or B2C. It doesn’t matter which vertical you operate in. If you process payments, you’re a target and not making your business save money as it should. 

As an executive, you must understand these risks and educate others about them by focusing on cybersecurity awareness month. And for a good primer on risk management, today we’ll also look at 5 of the best risk management tools for transaction fraud.

#1 Social Media Lookup

In risk management, the more data you have about a user, the better. Unfortunately, fraudsters are aware of that, which is why they try to build complete user profiles to purchase your goods or services.

However, there’s one thing they cannot do at scale: create a social media presence.

Or at least, not one that looks legitimate. It’s time-consuming and adds too much friction to their attacks. This is why a risk management tool that includes social media checks has a much better chance than one that only looks at IP addresses.

#2 Device Fingerprinting

Every connection to your business website comes with built-in data about the user’s device. Risk managers can learn whether it comes from a smartphone or laptop. But there’s a lot more to discover, such as the screen’s size, the time zone for the browser, or what kind of audio codecs are present.

All that information allows risk managers to create IDs for each connection – and more importantly, to highlight suspicious behavior in seconds.

This can prevent attack takeovers (ATO attacks) when harmful agents try to appropriate your users’ accounts and block transaction fraud before a payment goes through your checkout system.

#3 Custom Rules

A lot of legacy fraud management systems come with preset risk rules. At the most basic, it could be something like: if the IP is different from the shipping address, raise suspicion. This is all well and good but doesn’t always work with transaction fraud.

The reason? Fraudsters are adaptive. They quickly understand what works and what doesn’t and can use bots to automate testing with your website. This is why you must ensure your fraud management system allows for custom rules that you can proactively test and modify yourself.

#4 Machine Learning

Machine learning might be a buzzword in many industries, but if there’s a perfect case study for its uses, it’s in the anti-fraud world. It’s one of the best risk management tools for transaction fraud because it allows you to create risk rules based on the latest historical data.

Put. Every data point is logged into your system. The machine learning engine can then look for correlations between transactions that have been marked as suspicious or accepted as legitimate.

The engine will then suggest risk rules for further interactions. Risk managers can test these rules and see transaction fraud rates go down in front of your eyes.

#5 Email and Phone Data Enrichment

The general practice of data enrichment is quickly becoming a must-have for businesses. It allows your team to gather more intelligence about a user without slowing their journey down. When friction is the battleground where customers are won or lost these days, it’s more important than ever.

We’ve already mentioned social media lookup as point #1, which is a form of data enrichment. But you can also do a lot based on a single email address or phone number. This is particularly useful when users are asked to sign in or fill forms at checkout. You can use a data enrichment tool to check if the email or phone number is accurate, if it points to the correct geolocation, and if it’s been used in the past.

Combined with custom risk rules and social media lookup, these simple tools can help you get a complete picture of who you’re dealing with – so you can grow your business with complete peace of mind.

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