Risk & Compliance
Fraud Prevention
Definition
Fraud Prevention tools and strategies to detect and prevent fraudulent transactions before they complete. Includes AVS, CVV validation, 3DS, device fingerprinting, velocity checks, IP geolocation, and machine learning fraud scoring. Balance is critical - too aggressive blocks legitimate sales; too lenient increases fraud. Most PSPs offer built-in fraud tools; specialized providers (Signifyd, Riskified) offer guarantees.
Related Terms
CNP Fraud (Card Not Present)
Fraudulent transactions where the physical card is not present, typically in e-commerce. Includes stolen card credentials, account takeover, and synthetic identities. CNP fraud rates are significantly higher than card-present fraud because the merchant cannot verify physical card possession. Prevention relies on AVS, CVV, 3DS, device fingerprinting, and fraud scoring.
3D Secure (3DS)
An authentication protocol that adds a verification step during online card payments. The cardholder authenticates via their bank (password, SMS code, biometrics). 3DS2 is the current version, offering frictionless authentication for low-risk transactions. Mandatory in Europe under SCA/PSD2 requirements. Shifts fraud liability from merchant to issuer for authenticated transactions. Can impact conversion rates but reduces fraud.
AVS (Address Verification Service)
A fraud prevention tool that compares the billing address provided by the cardholder with the address on file at the issuing bank. Returns a match code indicating full match, partial match, or no match. Commonly used for CNP transactions. Not available in all countries. Should be one factor in fraud decisions, not the only one.
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