As a business, fraud is something to be aware of and to put preventative measures in place where possible. Just like cybercrime, online fraud can happen to anyone – it doesn’t discriminate regardless of whether you’re a big or small company.
Fraud scoring is a useful way of helping understand how risky a user action is and whether or not to trust it as a legitimate action. If you’ve got a fraud detection solution already in place, like a firewall for example, then chances are you’ve come across fraud scoring before.
What is fraud scoring? How does it work and what are the advantages of using it? In this article, we’ll cover all that as well as any downsides to using this method of fraud detection and how to prevent your business from falling to online fraud. As a business, any type of fraud can be damaging beyond repair, so it’s important to have procedures like fraud scoring in place.
What is fraud scoring?
Fraud scoring works by allocating a value which tells a business how risky a user action is. The rules in place might be looking at certain data points such as the IP address or longevity of the email address. These rules are what calculate and churn out a fraud score.
The purpose of a fraud score is that it’s an informational tool to assess risk. As a business, there are plenty of fraudsters online that are looking for vulnerable organizations that might have weaknesses when it comes to their security infrastructure.
Whilst we may have a lot of technology in place to protect ourselves online, fraudsters are getting clever about how they scam their victims. With fraud scoring, it’s an opportunity to get ahead of the fraudsters before they have a chance to get away with the deceit. Having something like this in place could prevent a lot of fraud from occurring.
How does fraud scoring work?
Fraud scoring works by identifying certain traits and sometimes looking at historical trends that come with suspicious or fraudulent behaviors.
In order for this method of fraud detection to work, anti-fraud software should be put in place. This will be required so that user data is accessible. The data is then fed through the relevant risk rules, which will determine whether or not the transaction made is a threat.
For example, a high-risk rule would be a credit card that’s been blacklisted before or an email address that is too long. With fraud scoring, it enables the individual or business operating it, to understand how dangerous an action is.
With fraud scoring, the business can automatically approve, reject or review the action that’s been taken. It helps prevent fraudulent activity from going anywhere beyond that initial stage without it being seen by you first. Consider it like a credit score check. Whilst it’s not entirely foolproof, it may be worthwhile having in place to provide that extra bit of protection.
Five advantages of fraud scoring
How is fraud scoring beneficial for your business? There are plenty of fraud detection tools out there, so why pick this method in particular?
There are benefits to check IP fraud scores in this day and age, particularly with so many businesses falling victim to online fraud specifically. We’ve seen a shift since the pandemic of more businesses operating online, making it more of a risk for those that don’t have proper security defenses in place.
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They’re automated for your business efficiency
One of the best features with a fraud scoring tool is that they’re usually automated. Instead of you having to manually review every purchase, you’re able to dictate to the system what score you want to be flagged for your attention. Either that, or you can automate the whole process by allowing the system to approve or deny the transaction based on the rules you’ve put in place.
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Flexibility to tailor to your use.
Having some flexibility within the systems and tools you use is important. It helps you adapt them to the business needs and infrastructure to provide better success. With a fraud scoring system, it helps you balance the number yourself to determine when you need to mitigate the risk presented.
Whilst not all of these fraud scoring tools will allow you to adjust the system to such an extent, it’s a useful thing to have in place regardless.
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It helps with scaling your business up or down.
Whether your business is in its infancy or it’s making headway at becoming more and more successful, it’s always good to have a tool or software that can scale your business up or down.
Fraud scores help to process transactions quickly but provide a level of security that wouldn’t have been there without it. It means that the more your business grows, the less you need to worry about increased threats like fraudulent transactions happening or being successful.
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Better user experience
With a fraud scoring system in place, it can help provide a better UX overall for all customers, whether they’re genuine customers or not. A smoother customer journey is always beneficial, especially with 70% of online businesses failing due to bad usability of the site.
Providing a better user experience for your customers is going to help encourage people to come back. For a lot of businesses nowadays, it’s much harder to retain customers than it is trying to find them.
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An extra level of safety
One of the most obvious benefits but still an advantage nonetheless. With fraud detectors in place like this one, it adds another layer of safety. It can alert you to potential risks of fraud without it going undetected and potentially causing the business more harm in the process.
As a result, having this process in place can also hopefully deter some fraudsters from even attempting to do damage.
Are there disadvantages to fraud scoring?
Whilst fraud scoring may seem like a great solution to your fraud worries, it’s not going to be entirely effective. There may be some that slip through the net or you may encounter genuine customers that have been caught up in the scoring system by error.
Some fraud scoring tools are more efficient than others, which is why you should consider comparing them when looking for one as a business. You want there to be enough flexibility in the rules you set when scoring certain user actions.
How to further prevent your business from fraud
It’s no surprise that fraudsters are getting more effective in their attempts to deceive businesses online. It’s a lot easier to do so online and with a lot of companies and individuals not having the best security measures in place, many of them can end up falling victim to it.
How do you prevent your business from fraud beyond just a fraud scoring system? Here are a few ways that you could help ensure your business doesn’t find itself at the mercy of fraudsters in 2022.
Audit your security systems inside and out.
When it comes to your security in place, take a look at what it currently is doing to prevent harm coming to your business. A security audit might be just what you need to help prevent fraudulent activity from taking place. The more you can put in place, the better your business is when it comes to protection.
Train your employees on cybercrime and fraudulent practices.
Your employees are another layer of defense for the business and that means they can benefit from being trained up on cybercrime and fraudulent practices that they may encounter whilst at work. Don’t just assume that everyone in your organization knows what to look out for, when it’s likely quite the opposite.
Secure and protect your business property.
Securing your business from a security perspective is essential. It means making sure your files are backed up properly and that the servers themselves are deadlock
Advise your customers to take precautions.
Put preventative measures in place to protect your business from fraud
Whether it’s fraud scoring or improving your firewall systems, preventative measures are better to have in place now than realizing it’s too late to do so. Your business is just as much at risk of becoming a victim of fraud or cybercrime as any other online. Don’t become complacent on matters relating to your security as a business.
Author Bio: Natalie Redman (LinkedIn)
Freelance writer for many clients across multiple industries. Natalie has two years of copywriting experience. Natalie has a wide range of experience copywriting for web pages for businesses across many industries. She’s also an owner of two blog websites and a Youtube content creator.
