Do You Really Need Fraud Prevention Services?

Fraud Prevention Services Cover

Fraud prevention services are a dime a dozen these days, but before you make the plunge, do check if you really need one.

Chances are, if you are on this page, you’re considering using a fraud prevention service. But you should know that not all of them are created equal.

In the first part of this post, we’ll look at 5 good reasons to use a fraud prevention service, and we’ll then look at the features you might need.

1. You Are in a High Risk Vertical

While all businesses can be victims of fraud, not all of them are targeted with the same frequency or sophistication. In fact, here are three signs you might be a valuable target for fraudsters:

  • Do you store high resale value items? 

High-end electronics, Apple products, computer hardware, cameras, smartphones, or luxury goods such as jewelry…. They’re all in high demand. According to a report by MarketWatch, luxury goods and electronics are at the top of the list for the most bought items with stolen credit card numbers.

It’s easy to see why. Fraudsters know it isn’t easy to buy with stolen credit card numbers, so they want to put the odds in their favour: one big score is easier to accomplish than 10 small ones – even if what you’re dealing with is large cryptocurrency sums rather than several transfers.

  • Do you operate as a digital wallet?

Fraudsters want the quickest route to cash. It’s a lot easier to log into someone’s account and drain the funds than to create a whole fake profile (a process known as an ATO, or account takeover attack).

And while you may immediately think of online bank accounts, there are a lot more options for fraudsters: gift cards from online stores count as digital cash, so do online casinos, and of course, cryptocurrency exchanges. These often have two points to secure: deposits with stolen cards, and withdrawals to drop bank accounts, so securing the gateway is just as important as onboarding.

  • Do you offer promos or sign up bonuses?

You might be the target of bonus hunters or bonus abusers. They are fraudsters who specialise in creating multiple accounts (multi-accounting) to reap as many rewards as they can get from your business.

This practice is particularly prevalent in the world of online gaming and casinos. However, we’ve also seen it happen with challenger banks who offer referral bonuses, and online stores delivering special discount coupons.

2. Fraud Prevention Services to Reduce Chargebacks

While chargebacks are protection, designed to help customers, every online business knows that they can be abused. And it costs a lot: retailers, for instance, not only lose the sale of a physical or digital item, but also have to pay a fee of $20 – $100.

In fact, it is estimated that every dollar lost to fraud ends up losing the organization up to three dollars in indirect costs. Chargebacks can even incur penalties from banks if they happen too often, as demonstrated by the strict Visa and Mastercard schemes that punish merchants with high fraud ratios.

Fraud Prevention Services quote

So how do fraud prevention services help? You are essentially installing a layer of security when your users sign up, login, make a payment (or deposit and withdrawal) from your site. This will allow you to get a better picture of the user, to see, for example, if:

  • There are discrepancies between their geolocation and the billing address.
  • The email address domain is disposable or high risk.
  • There is no social media profile linked to the user’s email address.
  • The email and phone number doesn’t match.

Individually, these details can only point towards risk. But when you combine multiple detection services like IP analysis, device fingerprinting, email and phone lookup and more, you create multi-layered fraud prevention that reduces your chargeback rates close to 0%.

It’s worth noting that these fraud prevention measures work just as well to stop transaction fraud as friendly fraud, which is when someone claims a chargeback after changing their mind, or realizing a family member used their card without approval.

3. Fraud Prevention Services to Protect Your Users

Account takeovers, or ATO attacks, is an increasingly costly issue for companies. In 2018, ATO accounted for $4 billion of losses for businesses worldwide. And the trend isn’t set to be curbed anytime soon, due to the increase in mobile usage. Javelin’s 2019 Identity Fraud Study saw a 45% increase in mobile ATO between 2018 and 2019, accounting for 679,000 incidents.

As the name suggests, an account takeover means one of your users is losing their account as it is stolen by a fraudster. It could be because they misplaced their login details, due to a data breach, or the fraudsters were lucky.

Either way, there’s only one way to avoid it: deploying the right fraud prevention services at the point of login. The same rules apply: gathering data about the login to see if it appears legitimate or risky:

  • Did they log in from a previously unused device?
  • In a location that seems out of the ordinary?
  • Were there too many unsuccessful login attempts in a row?

Answering these questions can let you know if the account seems compromised, and best of all: you don’t have to block it straight away. Thanks to dynamic login security, you can ask for extra authentication if you believe the risk is too high.

4. Fraud Prevention Services For Compliance With Regulations

Fraud prevention can actually support your SCA (strong customer authentication) methods, by allowing you to build better user profiles. This is particularly true in the fintech or financial world, where stringent rules and regulations can incur costly fines.

5. You Need to Grow Your Business Safely

Last but not least, fraud prevention services can provide an excellent ROI if they are deployed properly. You will be able to reduce the cost and headaches lost to transaction fraud, bonus abuse, ID fraud, and much more.



Don’t forget that fraud costs a lot more than just what’s lost in sales or funds. You are also paying out of your own pocket for customer support, a loss of customer trust and confidence in your company, which can hurt in the long term.

An Overview Of Different Kinds of Fraud Protection Services

If you believe your company meets any of the descriptions above, it’s time to start looking at the features of your fraud protection service.

In house fraud prevention services

You will need to staff your prevention department, which is recommended if you are working with strict data privacy guidelines. This gives you the most flexibility and control, but it’s also the most expensive solution. Salaries and IT costs can quickly balloon, especially as you need to scale your operations.

Traditional and legacy platforms

Some fraud protection services have been operating for decades. They fall under the legacy model, where they share data such as blacklists between their clients. Their technology has not evolved a lot in recent years, which makes them less agile, and a lot more costly than alternative solutions. Integrations are especially expensive and updates are less frequent.

Specific API Solutions

You can make certain API calls with specific fraud prevention services, for instance, to check geolocation or enrich data based on email addresses. These work well for very unique use cases, but can become costly as each requires their own license. You will also need to build a middleware platform, which can increase your IT spend drastically.

Cloud Based Fraud Protection Services

The new kids on the block in the world of protection. These tech startups are often more agile, flexible and affordable than other solutions. While most operate under the SaaS subscription model, at SEON we let you pay per API call, which gives you complete scaling flexibility. The tools you can use are also varied based on your needs, as we let you enrich data in one-click, or use a powerful Machine Learning engine to calculate risk.

Fraud Protection Services Features to Consider

Finally, let’s have a look at some of the features you should implement to protect yourself efficiently:

  • Data enrichment: the key to learning more about users is often to cross-reference their submitted data with external sources. At SEON, our data enrichment services are fully GDPR compliant, fast, and even available with one-click from a Chrome plugin.
  • Whitebox system with transparent results: If your system needs to calculate risk based on complex rules, you’ll need to be able to adjust and supervise it. Many fraud prevention services operate opaquely, without human-readable rules, which means you are at the mercy of their engine’s decision. At SEON, we deliver all our results through clear decision trees, which help you see exactly how the risk scores are calculated.
  • Working with custom data and parameters: always make sure you can submit specific data points to the system. Some fraud prevention services, for instance, only offer fields that make sense for ecommerce. At SEON, we offer custom fields so the ML engine can create rules based on any kind of data point, and adapt to your industry-specific needs.
  • Service response time: if you’re working with online tools, you’ll want to look at how fast the results are delivered, and how often the service is live. Any downtime can wreak havoc on your platform, and a delay can make the experience frustrating for your users. This is why SEON delivers results in under 1 second, and has a flawless uptime track record.

These are just a few examples, and there’s a lot more to consider. But don’t worry if you’re overwhelmed or confused. Hopefully, by this point, you’ll be convinced that you do need fraud prevention services, which should help you move forward in selecting the right one.

Just know that if you have any questions about SEON, our products or features, don’t hesitate to look at our resource pages, and you can even request a free demo to see how we can help you grow your business safely today.

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