How do payment gateways in Indonesia use fraud scoring to prevent suspicious transactions?

 High-risk merchants always face the threat of financial fraud in processing bulk payments daily. Fraud scoring is an advanced technology to prevent daily suspicious transactions without failure. It is an efficient system backed up by artificial intelligence used by payment gateways to help merchants from risk-prone industries. This blog is an insightful overview of the concept and function of a fraud scoring system to help every merchant understand its significance in the real business world.

What is fraud scoring?

Let us start with the meaning of fraud scoring to grasp its concept better.

Fraud scoring is an automation-driven system to quantify the risk level in daily transactions. Based on several indicators, the automated tools give transaction scores that decide its risk level. It is also called transaction risk scoring.

Example of fraud scoring – If a transaction takes place from a customer, i.d., blacklisted in the past, the transaction will be rejected. The scoring system may also sideline the transactions to leave them at the discretion of the merchant. For some customers, merchants may want to decide on their own. If the risk level is low, they may want to allow that payment.

Risk scoring occurs on the following factors –

·       Name of the customer

·       Email

·       AVS response

·       IP address

·       Phone/mobile number

·       History check from the records of recently stolen and sold credit cards

·       Shipment method

·       ZIP code

·       Time zone

If any of the above details match the records of suspicious transactions or customer identities, the concerned transaction is stopped immediately. This system is installed within the network provided by a payment gateway in Indonesia. Maybe all providers do not offer this added feature of fraud scoring, but in the case of high-risk payment solution companies, you will always find this system.

What are the benefits of fraud scoring for payment gateways and merchants?

Yes, it is not an exaggeration to say that the payment gateways provide fraud scoring to the merchants, but it is helpful for both. The scoring model simplifies the daily payment processing. It majorly works on automation, and once set, the system works effortlessly without human assistance.

     Automated decisions – Although the scoring system leaves some transactions for manual decisions, most of them are judged through the automatic system. Automation considerably reduces the hard work required by the merchant’s human power because only a few need manual scrutiny. The system does the major part of authenticating a payment through scoring, which gives a clear picture of the transaction history.

 

     Prevents merchant account rejection – A high number of fraud incidents on a merchant’s website can immediately make the acquiring banks reject his high-risk merchant account. But thanks to the risk scoring model that sends a red signal about suspicious transactions, the right action can be taken immediately to stop them. The scoring technology not only prevents fraud but also saves the reputation of a merchant.

 

 

     Reduce customer churn – Fraud scoring is done based on the available data. The transactions are matched with the other blacklisted and suspicious data, reducing the authentication process time. For example- Some e-commerce merchants, like Amazon, do not ask for the CVV number of a customer’s credit card. As a result, the payment process gets more speed, and customers get a happy and smooth payment experience.

 

     Faster business scaling – Of course, scaling is one of the most potential benefits of risk scoring. As a merchant, you can remain busy ensuring business growth; fraud prevention is taken care of by an automated system. The round-the-clock assistance of this system leaves the owner with ample time to focus on other aspects of the business. Better plans can be made for expanding a commercial entity to new locations.

 

Disadvantages of fraud scoring

Don't you want to see the other side of the coin? Well, for a merchant, especially a high-risk merchant, it is always vital to have an eagle's-eye view. Your online payment gateway comes with multiple payment solution features. You need to know how convenient those features are to your business requirements.

     Regular update in technology is required – You know that the hackers out there are not going to sit silent. Every day they invest in new ways and technologies to break the security measures. As a result, you cannot just set and forget your transaction risk scoring system. You must keep an eye on the latest fraud patterns and ways tricky minds use and update them regularly.

 

     Not effective in the case of friendly fraud – Certainly, it is true. Friendly fraud happens after the sale, and usually, the decision goes in the customer's favor. In such a situation, your transaction-risk detector may not be effective. For that, creating a complete system that pays equal attention to fraud detection and chargeback management is essential. After all, friendly fraud is a big reason behind chargebacks. All-inclusive international payment gateway solutions with a robust chargeback and risk detection policy are required.

     Constant alteration in rules – Every business has threshold rules about what type of transactions will be considered high-risk. These rules affect the other payment processing and business operations rules. With time, you may also need to change the thresholds; as a result, you must constantly invest in resources for many new regulations and maintain the old ones.

     Limited decision-power due to available fraud transaction list – Usually, the risk scoring system decides about a transaction according to the existing data. It just points out the transactions that have any suspicious records in the past. But what about the new customers, new transactions, and new customer IDs? Yes, the data can keep adding, but by that time, the merchant can be get tricked by many fraudsters.

Conclusion

For sure, transaction-risk scoring is a great tool to smoothen the complicated payment processing task. At the same time, it has some weaknesses that may make a merchant rethink its efficacy. But no tool in the world can be 100% perfect because every technology mitigates risk. The same technology gives ways to fraudsters to invent new ways to commit financial crimes. It is the reason that we can only use the available technology in the best possible manner and can enhance them with the latest advancements.

In the end, nothing in this world can be completely insignificant, and many high-risk merchants will agree that the risk-scoring model helps them considerably. For more knowledge about the fraud prevention tools and implementing one for your business, kindly visit High risk merchant account. If you are clear about what you need to make the company safe, finding a relatable solution is never a tough job.

Visit us at: Forex merchant account