Guest Perspective: New Strategies for Fighting Online Fraud

By Ryan Wilk, Director of Customer Success, NuData Security

New Strategies for Fighting Online Fraud In 2013, the FBI’s Internet Crime Complaint Center received 262,813 consumer complaints with an adjusted dollar loss of $781,841,6111, which is a 48.8 percent increase in reported losses since 2012.

The work of preventing online fraud is expensive, not to mention difficult. Businesses of all sizes must do all they can to safeguard sensitive data so it doesn’t fall into the wrong hands. Because online fraudsters are continually coming up with new schemes, fraud managers have to stay on their toes. Part of their job is to stay apprised of current best practices and tools to help them protect their organizations and their customers. For three of the latest best practices in Online Fraud Detection (OFD), read on.

1. Continuous behavioral monitoring

The ultimate goal for OFD is to find a method that continuously profiles users and accounts through their entire lifecycle across multiple channels, including desktop and mobile Web, mobile apps and call centers. Continuously profiling users’ behavior empowers two key capabilities. First, it enables fraud managers to detect and respond to fraud sooner, reducing both risk and fraud loss. Second, when the user does reach a transaction point, fraud managers have full context of all their previous actions and behavior to make a better decision on the transaction. This benefits revenue by providing:

  • Trust in the OFD method, which enables you to accept more orders
  • Better fraud prediction, which reduces the number of manual reviews
  • Inclusive behavior information in context, which reduces the time manual reviews take

2. Use a layered approach to fraud detection

Endpoint, navigation and user/account are the top three fraud detection layers, which in themselves provide powerful tools for recognizing fraud, but when combined, they unearth patterns that could not previously be discovered when the layers were viewed discretely.

For instance, this layered approach can detect that, although a user is logging in from a previously unknown device, you can tell by the typing patterns and by their behavior that it is still the correct user of the account. Otherwise, you could only recognize that the user isn’t using the same device as last time, which merely casts doubt as to whether it’s the same user.

The accuracy of fraud detection increases dramatically when these layers are combined.

By expanding protection across all five layers, organizations are able to identify anomalies, risks and fraud attempts across channels (such as mobile channels and different brand Websites), and by using specialist non-PII (personally identifiable information) data networks (layer five). Non-PII networks analyze billions of transactions, including user behaviors, to create a store of anonymous identities that are categorized as good users and users who have been implicated in fraud.

These identities remain completely anonymous and adhere to stringent privacy laws. With this collection of identities, an organization is provided an early warning system that is able to alert them when a “bad” user approaches, even if it is the first time the user is approaching one of their sites.

Monitoring all layers is essential to robust detection for the primary fraud types:

  • Use of stolen financial credentials
  • New account fraud
  • Account takeover fraud

3. Work with organizations that use account profiling, layered protection and behavioral analytics

When you consider each layer independently, the layers cannot communicate and share their knowledge. But a tightly integrated model allows each layer of fraud detection to communicate seamlessly with the others, identifying behavior and relationships that aren’t otherwise visible. As a result, organizations are able to detect more fraud and reduce false positives, both of which save money.

A Well-Rounded Approach

As the FBI statistics show, online fraud is up. Protecting against fraud is now a multi-billion dollar business. Fraudsters are clever and resourceful, and fraud managers must stay several steps ahead of them in order to keep their organizations and customers safe. Continuous behavioral monitoring and a five-layered fraud detection approach will help them to do just that, safeguarding data and the organization’s reputation. An added bonus of following these best practices is cost savings as well.

New Strategies for Fighting Online Fraud Ryan Wilk is the director of customer success for NuData Security. Previously, he was manager of Trust and Safety at StubHub and spent eight years with Universal Parks & Resorts in various e-c ommerce roles. NuData Security predicts and prevents online fraud, protecting businesses from brand damage and financial loss caused by fraudulent or malicious attacks. NuData Security analyzes and scores billions of users per year and services some of the largest ecommerce and Web properties around the globe. To download a full report on OFD best practices, click here .

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