How to Identify Credit Card Payment Fraud

February 14, 2023

During our third session of Fraud Office Hours, an attendee asked, "How can you identify credit card payment fraud?" Watch this video clip and read below to see how Unit21's Head of Fraud Risk, Alex Faivusovich, responded.

How to Detect Credit Card Payment Fraud

"We - as customers - have specific patterns that we follow, even without realizing that we are behaving in a pattern."

Card payment fraud is a classic type of payment fraud; it’s been around since the late eighties and has no signs of letting up. What we like about card payment fraud - as risk prevention professionals, that is - is that even today, it’s essential to look at customers as creatures of habit.

When people use their cards - and payment services in general - they have certain patterns they follow (often without even realizing that these patterns exist). It’s essential to profile your customers to understand their behavior and make fast decisions truly.

How do they use their cards? When do they use their cards? What type of activity are they doing? All of these questions are key to success when it comes to fighting card payment fraud.

Let’s illustrate this with an example.

If your customer is a 20-year-old university student, they will probably behave differently from a 75-year-old person who is already retired. You will see different activities, in terms of both transactions and other activities being conducted.

You’ll see different volumes as well. You’ll even see that activity is conducted at drastically different times. Younger people will traditionally be more active, especially during later hours of the day. On the other hand, older people will be more active in the mornings. All of this information about customer behavior and activity is extremely useful when it comes to detecting anomalies.

When you have good customer profiling, you can apply predictive behavior analysis as well. This lets you not only understand the legitimacy of the transaction being monitored, but empowers teams to quickly identify patterns they’ve already recognized. This enables teams easily detect when customers aren’t acting in a pattern - and then investigate the related incidents for suspicious activity.

How Unit21 Helps Prevent Card Payment Fraud

With Unit21’s flexible, customizable rules, you can build rules that look for the exact behavior you’re looking for. This isn’t just great for identifying card payment fraud, but it’s also ideal for identifying card payment testing—which often precipitates instances of card payment fraud. When done effectively, teams can identify when a fraudster is preparing to start card payment fraud, allowing them to step in to prevent that activity before it occurs.

Let’s look at an example to illustrate the level of flexibility the rules engine offers. To look for card payment testing, risk and compliance teams can develop a rule that monitors only receiving entities for more than 100 credit card transactions in an hour. The rule can then be filtered based on transaction values to look for low-value transactions that could signal card testing. For example, the team could filter for transactions between $0.05 and $0.50 or $0.05 and $1.00, ruling out larger transactions that don’t fit typical card testing behavior.

When these conditions are met, the user will be flagged for the risk and compliance team, so they can further investigate and take action. Ideally, they’ll be able to stop the cardholder before they are able to actually commit card payment fraud.

All of these values can be altered, including the number of transactions, the values, and the timeframe. This flexibility allows teams to refine their rules to better monitor for card payment fraud, and the testing that precipitates it.

Looking for more insights? Check out our third session of Fraud Office Hours on-demand for a deeper dive into current fraud trends and which preventative measures to consider.

New call-to-action

Getting started is easy

See first-hand how Unit21
can help bolster your risk & compliance operations