Step-by-step guide to transaction risk scoring

Providing the convenient online transactions and experiences customers expect without exposing your business to fraud or regulatory violations is a challenging balance. This article explores best practices for determining the right level of identity verification to deploy in each transaction, so that you can reduce fraud and friction while adhering to Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements.

Step 1: Establish a set of risk criteria that will help you identify possible red flags and proactively address them in your monitoring processes. These can include the following:

Step-by-step guide to transaction risk scoring Look for anomalies in transactions such as unexpected spikes in volume, frequency or value. Pay particular attention to transactions that deviate from your established pattern and those involving PEPs, sanctions lists, or other high-risk indicators.

Step-by-Step Guide to Transaction Risk Scoring: Improve Payment Security

Strong Mitigating Controls: Incorporate data collection and validation, device fingerprinting, and a host of other security measures into your transaction process to identify and mitigate potential risks. These controls can help you prevent fraud by identifying and blocking illegitimate transactions before they’re even processed.

If your acquirer allows it, implement a transaction risk analysis (TRA) system to automate and prioritize the detection of fraudulent transactions. A TRA solution works by inputting user profiles, transaction patterns and other data to determine a buyer’s intent. If the resulting score is poor, the transaction will trigger SCA guidelines and require 3DS authentication. In other cases, a transaction will be allowed to proceed if it scores well.…