Fraud

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Fraud
Track fraud metrics and implement prevention strategies to minimize losses

The fraud rate is measured as a ratio between fraudulent and successful transactions. It compares the total amount of fraudulent transactions to the total amount of successful transactions in U.S. dollars over a specific time period.

The way to calculate the fraud rate can differ depending on the payment system and how the payment system gathers data (by descriptors, merchant account IDs, or legal entities).

Download the checklist and protect your business from fraud and chargebacks.
Analysts examine locations, products, and customer behavior that can lead to an increase in the fraud rate.

Reviewing the product, payment process, and customer interactions helps find weak spots and suggest improvements.
Based on the analysis, additional measures are applied to reduce fraud risk. These can include velocity limits on transactions or requiring 3D Secure in specific regions. Anti-fraud risk rules can also block transactions or require 3D Secure for customers flagged for suspicious activity.

Calculate fraud rate
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Understanding this methodology makes it possible to accurately track and analyze fraud levels. Apply this data to implement effective strategies to mitigate risk and secure transactions.

➤ Fraud rate = fraud amount USD in current month / sale amount USD in current month

  • Metrics are calculated at the account level:
    • Numerator: The total amount in USD of fraud notifications received in the current month.
    • Denominator: The total amount in USD of revenue for the current month.
  • Sale date is determined by the settlement date, not the authorization date.
  • Transactions are only considered for card brands Visa and Mastercard since they provide fraud alerts.
  • Only acquiring banks that fully transmit fraud notifications are considered.
  • Fraud alerts can arrive for orders up to 180 days after the original transaction date, meaning alerts received in the current month can relate to orders from prior months.
➤ Fraud rate = fraud amount USD on cohort / sale amount USD of cohort

  • A cohort is a group of orders created in a specific calendar month:
    • Numerator: The total fraud amount in USD reported against orders within that cohort, tracked over the full alert window (up to 180 days).
    • Denominator: The total sale amount in USD of successful orders in that same cohort.
  • Used for evaluating the impact of risk rule changes and comparing fraud performance across payment methods or traffic segments, eliminating the cross-cohort mixing effect inherent in the aggregated approach.

Manage fraud rates
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Get antifraud_result to catch the pre-authorization decision from Solidgate Antifraud with real-time updated card order Webhook or on request for check order status API , or any card payments response.

Card fraud alerts API report helps merchants identify and respond to fraudulent transactions. Each alert includes the order ID, fraud amount in the transaction currency, and the date and time the fraud was reported.

Received fraud alert Webhook notifies of fraudulent activities reported by card schemes and enables rapid response.
To view the velocity rules

  1. Go to Fraud prevention > Rules.
  2. Find the rules you need to analyze.
ID is the unique number of the velocity rule, Decision indicates the action to prevent fraudulent activity, and Rule explains why the specific rule was triggered.

Use payment ip for full‑IP match, for example {{198.51.100.7}}


ID 4101 Reject payment ip = 198.51.100.7

Use payment ip keyword for partial/prefix match, for example {{203.0.113}} → subnet


ID 4102 Force 3DS payment ip 203.0.113

To bypass velocity rules or blocklist a customer

  1. Go to Fraud prevention > Lists.
  2. Click on Add to list to create a new record.
  3. Complete the list settings by specifying the following:
    • List type
    • Field value
    • Optionally, add the number of days until it expires
  4. Click on Add to create the new list.

Analysis of fraud causes
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Friendly fraud: Lack of transparency in terms can lead customers to commit fraud unwittingly.
solution Ensure clarity of terms and ease of subscription management.

Product issues: The received product does not meet expectations or is of poor quality.
solution Analyze customer reviews and improve quality.

Misleading descriptions: Discrepancies between descriptions and the actual goods/services.
solution Standardize descriptions to reflect the content of the purchase accurately.
Card verification fraud: Attempts to verify card validity through microtransactions.
solution Set limits on the number of payment attempts from a single customer or IP address.

Account takeover: Illegal account acquisition through phishing, brute force, and more.
solution Apply multifactor authentication and monitor for abnormal customer behavior.

Affiliate fraud: Manipulation of traffic or payments to gain undue benefits.
solution Work closely with affiliate networks and audit traffic sources.

Visa uses descriptors to group and calculate fraud rates, monitoring transaction activity and linking results to specific merchants, goods, or services. Under Visa’s Acquirer Monitoring Program Glossary
VAMP is designed to monitor and manage risk among Visa acquirers and their merchants, aiming to protect the integrity of the Visa payment system by preventing fraud and excessive chargebacks. (VAMP), Visa reviews monthly processing data to identify merchants exceeding fraud or dispute thresholds. VAMP includes metrics such as the VAMP Ratio and Enumeration Ratio to enhance fraud detection and prevention. Enrolled businesses must submit remediation plans and might face penalties. To exit the program, thresholds must be met for at least one month.

Mastercard uses Merchant ID (MID) to group transactions and assess fraud levels. The formula divides the number of chargebacks per month by the total number of successful transactions from the previous month. Only the first 35 chargebacks from the same card are counted. Mastercard’s Excessive Chargeback Merchant Glossary
The ECM categorizes merchants into tiers based on their chargeback rates, enforcing measures to maintain transaction integrity. (ECM) and Excessive Fraud Merchant Compliance Program Glossary
The EFM targets e-commerce fraud by setting strict thresholds for fraud-related chargebacks, enhancing merchant accountability and transaction security. (EFM) are key programs for managing chargebacks and fraud.

Other card networks like American Express, Discover, Diners, and JCB identify merchants by their account ID. They calculate fraud rate using either the number of chargebacks or fraud amount in a month divided by the total successful transactions or sales amount for the same month.

To fully understand these processes, study the thresholds of Glossary
Prevent risk by keeping chargeback and fraud ratio below monitoring thresholds. monitoring programs individually for each card network.

Solidgate uses TC40 (Visa) and SAFE (Mastercard) data to effectively monitor credit card fraud. These reports contain cardholder fraud claims along with detailed transaction information.

A TC40 or SAFE report indicates a claim of a fraudulent charge and requires an immediate review. It is important to note that not every TC40 report results in a chargeback.

In some cases, merchants can issue refunds, thereby resolving the issue without proceeding to a chargeback.
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