Fraud Detection API: When Is it Best to Use?

July 14, 2021

A fraud detection API has the potential to significantly boost control and flexibility for various types of organisations. 

But at what point is it necessary to step up to a higher standard in payment fraud prevention and detection, like the solutions engineered by Fraudio?

API Mechanics Explained

Application Programming Interfaces (APIs) for fraud detection and prevention are highly advanced and technologically sophisticated systems. However, the basic principles behind API mechanics are surprisingly straightforward.

APIS enable the two systems to work together, seamlessly connecting software suites or apps and sharing data accordingly. This can be extremely useful in the field of fraud transaction detection and prevention, as it enables businesses to pair their existing software with fraud prevention systems like Fraudio. 

Protecting your organisation from the attacks of fraudsters means analysing and scrutinising as much information as possible in real-time. Conducting manual checks may be impractical or impossible, just as in-house security software and general safety protocols may not be sufficient to thwart sophisticated fraudsters.

This is where it often proves beneficial to use fraud prevention APIs.

How Do Fraud Detection Systems Work?

The success of a fraud detection system is dependent on its access to relevant data. Data is gathered in a variety of forms and via numerous interactions, including but not limited to the following:

The key to a powerful prevention system is to access as much customer data as possible. The key points where you want to gather user data are:

  • Any KYC-data and other meta data about merchants
  • Logins where existing customers signed into their accounts
  • Transactions of any kind when goods or services are purchased
  • Other activities like withdrawals, deposits, transfers and so on 
  • Chargebacks and the reason of the chargeback

All of this data will subsequently be transferred to the organisation’s preferred fraud detection system, in order to check for discrepancies or irregularities. Fraud detection machine learning enables the system to scrutinise the data on a much deeper level, literally ‘learning’ and expanding its capabilities with every transaction or interaction.

A ‘risk score’ is then established and assigned by the system, which provides an indication to the user as to the safety or otherwise of the activity. A manual decision can then be made as to whether to Approve, Decline, or Review the activity further.

Examples of the kinds of activities that may be flagged as suspicious or in need of manual analysis include the following:

  • An existing user logs into their account from a different country using a different type of device. Device fingerprinting and IP analysis flag the activity as suspicious, due to the possibility of an account take over attack having taken place.
  • The name and/or address used by a customer when making a payment does not match the information on the credit or debit card they are attempting to use. This may be indicative of a stolen card, or a card being used without the authorisation of the owner.
  • A new customer signs up using an email address domain that has been stored by the system as suspicious due to previous attacks or discrepancies being traced back to this same domain. 
  • A new or existing customer attempts to make several payments using different payment methods which are all declined, which may be indicative of the use of stolen cards or hijacked details.

The volume of data that needs to be analysed almost instantaneously to conduct these kinds of checks in real-time is staggering. Which is precisely where cloud-based, AI-powered systems like Fraudio can prove invaluable for many different types of organisations.

What Are the Benefits of Using Fraud Prevention APIs?

The question as to when it is best to use a fraud detection API depends on how seriously you take fraud prevention. Irrespective of the size and nature of the business you run, proactivity holds the key to prevention and protection.

As for the specific benefits of using fraud prevention APIs, systems like Fraudio can prove advantageous in the following ways:

  1. Limitless scalability. The flexibility of cloud-based systems like Fraudio ensures the changing and shifting requirements of the growing business are covered at all times. 
  2. Advanced automation. AI and fraud detection machine learning allow for the automation of prevention measures on an entirely new a level.  Those who adopt systems like Fraudio benefit from additional time and resources to be deployed elsewhere.
  3. Minimal Manpower requirements. Speaking of which, a technologically advanced fraud detection system can technically do the work of an entire team of fraud detection and prevention specialists. 
  4. Ease of integration. Cloud-based fraud detection systems managed remotely can be integrated seamlessly and effortlessly, with no disruptive downtime and no formal training required for the workforce.
  5. Extensive customisation.  The requirements of a small online store will inherently be different to those of a major online casino. APIs provide the flexibility and customisation options needed to meet the exact requirements of all types of businesses.

Ultimately, an intelligent fraud prevention API can bolster your organisation’s financial security, while significantly reducing the workload for you and your employees.

Hence, the answer to the initial question as to when fraud detection API should be integrated is…as soon as realistically possible. If not already using the most robust measures to protect your business, your risk of falling victim to fraud could be escalating by the day. 

Book your obligation-free consultation with a member of the Fraudio management team today to learn more about our state-of-the-art fraud prevention system.

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