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Clean Fraud: Still Not Fun

Posted on 1 December, 2016

The name “clean fraud” is misleading because there’s nothing clean about it. Actually, clean fraud is one of the most dangerous and fastest-growing threats to merchants, especially high-risk ones. Thankfully, there are ways that merchants can lower their risk of chargebacks.

What Is Clean Fraud?

A survey from CyberSource has revealed that clean fraud is currently the top concern (88%) for UK businesses, and it’s not hard to understand why. Fraudsters steal credit card information and great amounts of the rightful owner’s personal data, which allows them to impersonate the cardholder and fool the fraud detection system.

Clean fraud is extremely difficult to identify and therefore hard to prevent. Merchants can’t distinguish real customers from fraudsters because all the information provided at the booking stage looks correct and the typical fraud detection systems are circumvented. The account information matches the credit card information, and the card verification number is correct. The IP address matches the location, and there doesn’t appear to be a negative order history either by checking the name or the credit card number.

Clean fraud is particularly dangerous for merchants because it leads to a 50-50% chance of incurring in revenue loss. The merchant can correctly identify a valid booking or a booking made by fraudsters, but it’s easy for a merchant to assume a transaction is valid when it’s not and to receive a chargeback later. Also, a merchant will also lose revenue when wrongly identifying a fraudulent transaction and losing a valid sale.

What Can Merchants Do to Prevent Clean Fraud?

Clean fraud is hard to recognize, but there are a few precautions that merchants need to take in order to minimize their risk of chargebacks.

Use Advanced Fraud Detection Tools

CyberSource interviewed 200 UK businesses and revealed that only five detection tools are being used by more than 100 respondents. Three of the most used tools are CVN, AVS, and postal address validation. Unfortunately, fraudsters are very familiar with the basic tools, so they’re easy for them to circumvent.

Less than 25% of the survey’s respondents use more sophisticated tools such as multi-merchant data, device fingerprinting, and two-factor phone authentication. The use of these advanced tools can greatly reduce the risk of clean fraud.

Analyze Customer Data

Analyzing customer data is essential for understanding how fraud works and for learning how to identify the telling signs of fraudulent activity. Moreover, this kind of analysis can help improve the consumers’ experience and encourage a higher conversion rate among returning customers.

Use a Multilayered Approach

With new frauds being invented every day, it’s essential for merchants to target the different fraud threats at the same time. It might be helpful to turn to an expert in fraud prevention who can put in place a multilayered solution that includes user authentication, fraud filters, and other necessary tools.

If you operate in a high-risk industry, consider opening a high-risk merchant account. High-risk merchant accounts have benefits that outweigh the increased costs. One of the perks is limited penalties for chargeback activity.

Clean fraud is a threat but can be beaten. Now more than ever, merchants need to understand how fraud works and implement the necessary solutions to prevent loss.


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Bad credit merchant account credit card processing services

Accept all major credit cards

Regardless of Credit History!