Fighting Friendly Fraud With Shared Device Reputation
August 21st, 2009 by Max Anhoury
There are many types of security threats out there that get significant press. Whether it is identity theft, credit card theft, account takeover, romance scams or money laundering, online crime is a very prevalent and understood component of the Internet.
But one type of fraud that isn’t often talked about—despite being a huge challenge for online merchants—is friendly fraud. Many of our customers struggle with friendly fraud on a regular basis.
Friendly fraud occurs when an individual makes a purchase online and then denies the purchase with their card company after they have received the goods. The chargeback is processed leaving the merchant ultimately responsible for the purchase. This can often coincide with denial of receipt of the goods or return of something other than the new goods that were purchased.
There are two basic challenges to catching friendly fraud. First off, standard identity and credit card checks won’t catch the fraud because the online consumer is the actual card holder. Then, in addition, there’s generally a significant time lapse between when the original purchase is made and when the chargeback is processed. During the months that it can take for a chargeback to show up, the person committing the fraud can make multiple purchases.
This is where a shared device reputation service, like that offered by iovation, can make a big difference and offer some very unique value. Typically, repeat friendly fraudsters do not limit themselves to one company. Instead they spread their purchases across multiple online merchants in an effort to acquire as many goods as possible without arousing suspicions.
The fact that these fraudsters are targeting multiple merchants at once makes the ability for those merchants to share fraud information extremely valuable. A shared device reputation service allows online merchants to benefit from the knowledge and experience of their peers so that if an individual commits friendly fraud at one merchant site, and then shows up at a second site, also protected by iovation, that second merchant will be alerted. With over 140 million devices in iovation’s Device Reputation Authority and over 2 billion online transactions checked for fraud, we at iovation offer a unique value to our customers. This is even more compelling because friendly fraud is a specific type of fraud we track among the 32 overall categories of fraud and abuse.
Friendly fraud isn’t so friendly and it is even harder to stop. The key to fighting cross-merchant fraud is being able to work together and benefit from the experiences of your peers.
