Strategies for Avoiding High-Risk Transactions

Strategies for Avoiding High-Risk Transactions

Daniel Hall 25/06/2021
Strategies for Avoiding High-Risk Transactions

While seemingly vague, the degree of transaction risk has become one of the most ubiquitous attributes to denote unwanted or challenging situations that a business owner and/or a customer might face.

Indeed, not all transactions are created equal. People pay under a variety of circumstances, potentially creating or mitigating various fraud-related risks. Minimizing the embedded danger is vital to winning customer trust and protecting your revenue as a company. This article explores several high-risk processing approaches that can be incorporated in a gateway in order to create a safe payment environment for the business and customers alike.

Business Needs

Evaluate Transactions

To avoid potentially unfavorable transactions, a business needs to implement an algorithm for detecting such situations. While some rules of thumb exist for both card-present and card-not-present payments, manually assessing every detail of the circumstances under which the transaction is to take place is both time-consuming and potentially overwhelming. 

Fortunately, today’s gateway systems often come with inbuilt automated transaction evaluation tools. A specific algorithm used to ensure automation can vary, but the common idea is to utilize technology, often including machine learning as part of artificial intelligence to mimic the perfectly vigilant human’s approach. Useful tools include whitelisting, blacklisting, velocity checks, and more, often combined. This type of preliminary protection is especially helpful when it comes to preventing so-called friendly fraud and chargeback issues. However, it can be useful against a variety of other potential transaction problems.

The degree of decline automation based on evaluation results will vary from system to system. In most cases, high-risk transactions are still left to be processed or declined by the vendor depending on their approach.

Layer Identity Checks

In situations where it’s the merchant’s decision not to decline a transaction automatically evaluated as high-risk, enhanced authentication procedures consisting of multiple steps are often utilized to reduce risk. Common tools include MasterCard SecureCode and Verified by Visa. In both cases, the payer’s identity is verified by the bank that they are using as an extra step in the verification process, thus significantly reducing the risk of fraud.

Sometimes it might be viable for the merchant to ensure that the card is present while the customer is making a transaction. A popular and straightforward solution used in such cases is insisting on the payer putting in the Card Verification Value. While not a guarantee of risk-free transactions, it can add yet another dimension to your security measures aimed at preventing credit card fraud.

Purchase collection also offers opportunities for customer identification in case a fraudulent transaction did take place. Many businesses will ask buyers to provide their IDs and compare their actual signature with the one on the credit card. This is also the reason for using acknowledgment forms to confirm that the goods have been received.

Manual Reviews

On top of the multiple layers of automated checks, merchants often choose to review their potential buyers’ purchase histories and study their cards for signs of damage and/or tampering with card-present transactions.

While some of these practices are built into gateways as part of the evaluation system, extra security is welcome when it comes to highly suspicious purchases. For example, it is fairly common practice to only allow purchases with the credit card present rather than rely on card-not-present procedures under alarming circumstances. Besides, many vendors will not accept split payments for the same reason.

Last but Not Least: Be Vigilant

Unfortunately, high-risk transactions are something you are unlikely to completely avoid as a business owner. The primary reason why potentially dangerous situations occur so frequently is that increased risk levels can be caused by a broad variety of factors, often acting synergistically to make the transaction background look even more confusing.

As we have seen before, the market offers a range of fraud protection solutions built into your gateway for enhanced security. There are also preliminary checks to evaluate a particular payment situation so that those in control can proceed according to the risk level. The key to avoiding undesirable transactions is therefore to combine a powerful automated protection system with strong vigilance and strict adherence to your payment processing procedures as part of your corporate culture.

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Daniel Hall

Business Expert

Daniel Hall is an experienced digital marketer, author and world traveller. He spends a lot of his free time flipping through books and learning about a plethora of topics.


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