12 Best Practices to Fight Fraud Attacks Targeting Digital Products
For the 12 days of Christmas—or any time of the year—here are 12 best practices to help sellers of digital products fight fraudsters. These practices take into account the fact that digital goods merchants face unique fraud prevention challenges, including:
- Buyer Expectation of Immediate Fulfillment. Digital goods merchants must decide in real-time whether to approve or decline. Fraudsters exploit this highly-condensed decision window to improve their chances of escaping detection.
- Less Data Available for Fraud Screening. Data is a fraud prevention analyst’s best friend. But with digital goods, orders typically include fewer data points.
- Higher Incidence of Mobile Transactions. Many digital products are intended specifically for purchase or use on mobile devices—mobile apps, music downloads, electronic tickets, and more. But mobile transactions can be riskier than conventional eCommerce: 60% of overall fraud originates on mobile and more than 1 in 3 attempted fraudulent mobile transactions are successful.
- Balancing User Experience with Risk. Sellers of digital goods need high-performance fraud prevention systems that reduce friction and accelerate conversions. Every 100-millisecond improvement in checkout page response can result in a 1% increase in revenue.
The 12 best practices listed below are based on a multi-layered approach that integrates systems and processes. This comprehensive strategy has been proven to reduce chargebacks, increase sales, and lower fraud mitigation expenses for sellers of digital goods:
- Multiple, advanced screening technologies. A single tool can be easily defeated. The more technologies used and the more data analyzed, the more obstacles fraudsters have to overcome.
- Multiple stages. Put checks in place throughout the buying path—before authorization (e.g., velocity checks), at authorization (e.g., risk scoring), and post-authorization (e.g., Chargeback Alerts).
- Chargeback alerts. Electronic notification services warn you immediately whenever a TC-40 claim is filed.
- Require account registration. The data entry required for account creation generates additional information for screening and slows down fraudsters, causing them to abandon your site.
- Block and/or detect bots by using technologies that confirm human activity and by monitoring navigation cues, time-on-page cues, and other non-customary behavior that reveals non-human conduct.
- Two-factor authentication. Require PINs and/or confirmation by SMS text message.
- Accept all payment types. Make sure your fraud prevention isn’t limited by the payment types it can assess. Otherwise, you may find your growth stymied when it’s time to enter new channels, markets, or countries.
- Device and channel neutral. Whether an order originates on desktop, mobile, phone, or fax, make sure the same multi-layered approach and multiple screening technologies get applied—while still providing customization that allows you to optimize results based on the unique attributes of that channel.
- Standardized policies. Clearly document and publicize policies for customer refunds, chargebacks, and “stolen” digital goods and provide “talking points” to help customer service reps better handle complaints.
- Dynamic, real-time data. Automated attacks can rack up hundreds or thousands of fraudulent orders in minutes. Using static or even hours-old data makes you vulnerable to these rapid-fire attacks.
- Advanced AI & Machine Learning technology. Artificial Intelligence (AI) and Machine Learning help you go beyond mere detection and prevention. They enable you to take it to the next level: predicting emerging fraud threats in low-information scenarios, such as first-time fraud.
- Experienced human intelligence. Systems developed and tuned by fraud industry experts have an inherent advantage against adaptable human adversaries. Make sure your fraud system is developed by providers with deep and broad eCommerce antifraud expertise.
Want to explore further? Download the eBook “Fraud in a Digital World” and settle in with a cup of holiday hot chocolate to get insights and hot tips for fighting digital products fraud this holiday season…and all through the coming year.