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Fraud is an ever-present concern in today’s digital economy, especially for businesses that process online or remote payments. Among the many tools available to protect against fraud, velocity checks stand out as a particularly effective strategy. But what exactly are velocity checks, and how can they be used to safeguard your business? Let’s dive into the details.
What are Velocity Checks to Prevent Fraud?
At their core, velocity checks are a method of monitoring the frequency of transactions within a specific time frame. They are designed to detect suspicious activity by flagging or blocking transactions that exceed predefined thresholds. For example, if multiple transactions are attempted from the same credit card or IP address within a short period, velocity checks can identify this as a potential red flag for fraud, such as card testing or other malicious activities.
Why Velocity Checks Matter for Fraud Prevention
Velocity checks are vital for businesses because they provide an extra layer of defense against fraudsters who attempt to exploit payment systems. By identifying unusual transaction patterns early, businesses can prevent fraudulent transactions before they impact their bottom line. Additionally, velocity checks help protect customers from unauthorized charges, maintaining trust and confidence in your brand.
How Do Velocity Checks Work?
The Mechanics of Velocity Checks
So, how exactly do velocity checks work, and why are they such a critical component of fraud prevention? Let’s break it down.
Velocity checks help businesses keep a close eye on the frequency and patterns of transactions over a defined period. Imagine a scenario where a single credit card is used to make ten separate purchases in under a minute. While it’s possible that these transactions are legitimate, such behavior should raise some red flags. This could indicate that someone is testing the card’s validity—something fraudsters commonly do with stolen cards. Velocity checks are designed to identify these unusual patterns and flag them for further review, allowing businesses to act swiftly and prevent potential fraud before it escalates.
What Do Velocity Checks Monitor?
Velocity checks monitor several key indicators that help businesses spot suspicious activity:
Transaction Frequency: This is the most straightforward indicator. Velocity checks monitor how many transactions are attempted within a specified time frame. For example, if a card is used for five purchases in just a few seconds, this could be indicative of card testing, where a scammer tries to verify stolen card details by making multiple small purchases.
IP Address Monitoring: Another important function of velocity checks is monitoring the origin of the transactions. Velocity checks can track whether multiple transactions are originating from the same IP address in a short period. If you see several purchases coming from a single IP address but using different payment methods or accounts, it could suggest that someone is attempting to process fraudulent transactions from a compromised location.
Payment Method Repetition: Repeated use of the same credit card, especially within a short span of time, is another red flag. For instance, if the same card is used across different accounts or for multiple purchases in rapid succession, it could indicate that a scammer is using a stolen card to make as many transactions as possible before the cardholder notices and blocks the card.
How These Indicators Prevent Fraud
Velocity checks give businesses the ability to detect and respond to suspicious activity in real-time using the above methods. For example, if a transaction frequency limit is breached—say, more than three transactions from the same card within a minute—the system can automatically flag or block further transactions. This not only prevents fraudulent activities from continuing, ensuring the card owner is protected, but also protects the business from chargebacks, a diminished reputation and financial loss.
When put into practice, velocity checks act as a first line of defense, filtering out high-risk transactions before they can do serious damage. They provide a proactive approach to fraud prevention, enabling businesses to take control of their transaction security and reduce the risk of being targeted by scammers. With velocity checks in place, you’re not just reacting to fraud after it happens—you’re actively preventing it.
Examples of Suspicious Activity Detected by Velocity Checks
Velocity checks are incredibly versatile and effective tools that should be top of mind for every merchant that process payments online to detect a variety of fraudulent activities. As we stated above they work by monitoring transaction patterns and identifying behaviors that deviate from what is considered normal for a particular account, card, or user. Let’s explore some of the specific types of fraud that velocity checks can catch, and why they’re so important for protecting your business.
Velocity Checks Can Stop Card Testing Fraud In It's Tracks
One of the most common types of fraud that velocity checks help detect is card testing also known as card spinning. This occurs when fraudsters obtain stolen credit card information and want to verify whether the card is still active before attempting larger transactions. To do this, they often make a series of small purchases, usually just a few dollars each, because smaller amounts are less likely to be noticed or challenged by the cardholder. However, these small transactions, especially when they occur in quick succession, create an abnormal pattern that velocity checks can easily detect.
Imagine you’re running an online store, and suddenly you notice five or six $1 transactions from the same credit card within a minute. This should raise a red flag. Velocity checks would automatically flag this behavior, allowing you to review the transactions before any further fraudulent activity can take place. By catching these small tests early, you can prevent the fraudster from making larger, more damaging purchases later on.
Velocity Checks Fight Multiple Failed Attempts Fraud
Another scenario where velocity checks shine is in detecting multiple failed attempts at processing a payment. Scammers often use trial-and-error methods to guess credit card details—like trying different expiration dates, CVV codes, or billing addresses—until they find a combination that works. This is especially common in automated attacks, where bots are programmed to run through lists of potential card details at high speed.
Without velocity checks, these repeated failed attempts might go unnoticed until it’s too late. However, with velocity checks in place, the system can recognize when there are multiple unsuccessful attempts within a short timeframe and take action. This might include temporarily blocking the IP address, flagging the account for review, or even locking the card to prevent further attempts. By doing this, velocity checks not only stop fraudsters in their tracks but also protect your customers from the frustration and potential financial loss associated with fraudulent transactions.
Velocity Checks Flag High Transaction Frequency To Prevent Fraud
The third important area where velocity checks are particularly effective is in monitoring high transaction frequency. This generally involves an unusually large number of transactions being made from the same card or IP address in a very short period. For example, if a single credit card is used for ten transactions within the span of a few minutes, this could indicate that someone is trying to commit fraud, especially if the cardholder typically makes only a few transactions per day.
This type of behavior is often associated with fraud rings or automated bot attacks, where the goal is to maximize the amount stolen before the cardholder or the bank notices and blocks the card. Velocity checks can flag this spike in activity and trigger an alert, giving you the opportunity to pause or review the transactions before they’re processed. This is particularly useful for businesses that handle a large volume of transactions daily, as it helps maintain the integrity of your payment processing system and reduces the risk of being targeted by grifters and criminals.
Why Velocity Checks are an Indispensable Tool in our Fraud Prevention Arsenal
In all of these cases, velocity checks act as an early warning system, alerting you to potential fraud before it can cause significant damage. They make it easy to monitor the frequency, timing, and pattern of transactions, thereby helping you identify when something doesn’t add up, so you can take proactive steps to protect your business and your customers. Scammers are always looking for ways that new technology can beat the security systems of law abiding consumers and businesses, having velocity checks in place is not just a good idea—it’s essential for any business that wants to stay ahead of the curve in fraud prevention.
How to Configure Velocity Checks to Prevent Fraud
When it comes to setting up velocity checks, the process starts with determining the right thresholds for your business. This step is crucial because it dictates how sensitive your system will be to potential fraud. The idea is to decide how many transactions within a specific time frame might be too many, indicating suspicious behavior. For example, you might set a limit of three transactions per minute from the same credit card. This might seem straightforward, but what happens if your business regularly handles high-volume transactions, such as during a sale or a busy holiday period? The key here is striking the right balance between security and customer convenience. You want to catch fraudsters, but you don’t want to disrupt legitimate customer transactions.
This is where Durango Merchant Services comes in. We can help you analyze your transaction history to identify patterns that will inform your threshold settings. For instance, by understanding how your customers typically shop—how many purchases they make within a certain timeframe and what kind of patterns emerge during peak sales periods—Durango can help you set thresholds that are both effective at catching fraud and considerate of your legitimate customers’ behavior. The goal is to configure velocity checks that protect your business without alienating your customers.
Customizing Velocity Check Settings
Every business is unique, and what works for one might not work for another. This means that a one-size-fits-all approach simply doesn’t cut it when it comes to fraud prevention. Customizing your velocity check settings allows you to tailor the protection to your business’s specific needs. For instance, you might want to set different thresholds for different types of transactions. Perhaps smaller purchases can have a higher limit, allowing more frequent transactions without raising alarms, while larger transactions might trigger a review if they occur too close together. Additionally, the time frames can be adjusted. For example, you could implement stricter limits during periods when fraud is more likely, such as during major holidays when transaction volumes typically spike.
Common Challenges and Solutions
While velocity checks are a powerful tool in preventing fraud, they do come with their own set of challenges. One common issue is the occurrence of false positives. These happen when legitimate transactions are incorrectly flagged as fraudulent. False positives can be particularly frustrating for customers who are just trying to make a purchase and can lead to lost sales and customer dissatisfaction. Regularly reviewing and adjusting your velocity check settings is important to minimizing these occurrences. By fine-tuning the thresholds and keeping an eye on transaction trends, you can reduce the likelihood of legitimate transactions being blocked.
Another challenge arises for businesses that handle a high volume of transactions daily. For these companies, setting thresholds that are too low can result in a flood of flagged transactions, overwhelming your team and potentially leading to delays in processing legitimate orders. On the other hand, setting them too high could let some fraudulent activities slip through. This is where Durango Merchant Services really shines—they offer ongoing support and can help advise on adjustments to your velocity checks as your business grows and evolves. Whether you’re ramping up for a busy season or just noticing shifts in transaction patterns, Durango can help you tweak your settings to maintain the right balance between security and efficiency. With our expertise backing you up, you can rest assured that your account manager can help point you in the right direction, helping to protect your business without slowing it down.
Integrating Velocity Checks into Your Fraud Prevention Strategy
To build a robust defense against fraud, velocity checks are a powerful tool that works best as part of a broader, multi-layered approach. While velocity checks are effective on their own, their true strength is revealed when they’re combined with other fraud detection methods, creating a comprehensive safety net that protects your business from multiple angles.
Combining Velocity Checks with Other Fraud Detection Tools
Velocity checks excel at spotting suspicious transaction patterns, like rapid-fire purchases from the same credit card or IP address. However, their effectiveness is amplified when used in conjunction with additional fraud prevention tools. Think of it as creating a fortress around your payment system—each layer of protection reinforces the others.
For instance, integrating AI-driven fraud detection with velocity checks allows you to analyze vast amounts of transaction data in real-time. This combination doesn’t just flag suspicious behavior; it also considers the broader context, such as whether a transaction deviates from a customer’s usual purchasing habits or takes place in an unusual location. By layering these technologies, you’re better equipped to catch even the most sophisticated fraud attempts.
Adding an Address Verification System (AVS) to the mix provides another line of defense. AVS checks the billing address provided by the customer against the address on file with the card issuer. When used alongside velocity checks, AVS helps confirm whether a transaction is legitimate. For example, if a card is used multiple times in a short span but the billing address doesn’t match, that’s a significant red flag. By combining AVS with velocity checks, you make it much harder for fraudsters to succeed.
The Card Verification Value (CVV) check adds yet another protective layer. This involves requiring the customer to enter the CVV code from their card—a number that isn’t stored in databases and is therefore harder for fraudsters to obtain. When CVV checks are paired with velocity checks, you create a scenario where only those with the physical card can complete transactions, making it far more difficult for unauthorized users to make purchases.
How Durango Pay Gateway and Fluid Pay Enhance Velocity Check Integration With Additional Tools
One of the standout benefits of partnering with Durango Pay Gateway or Fluid Pay is how effortlessly they can help you blend velocity checks with these other fraud detection tools. They simplify the process, ensuring that all your security measures are harmonized and working together seamlessly.
For example, Durango Merchant Services can assist you in linking velocity checks with real-time fraud monitoring systems. This integration allows you to not only catch suspicious transaction patterns as they occur but also monitor other critical aspects of the transaction, such as the location, device type, and user behavior. This holistic approach enables you to act quickly, stopping fraud before it can cause harm to your business.
Additionally, Durango can help you incorporate geo-blocking with velocity checks. Geo-blocking enables you to restrict transactions from specific countries or regions known for high levels of fraud. When paired with velocity checks, you can set up rules that trigger alerts or block transactions if they originate from risky locations and exceed your predefined transaction limits. This layered strategy drastically reduces the chances of fraudulent transactions slipping through the cracks.
While integrating these tools might sound complex, Durango Pay Gateway or Fluid Pay makes the process straightforward and effective. They ensure that your velocity checks are not just standing alone but are part of a well-rounded, highly efficient fraud prevention strategy. Our expertise helps you tailor these tools to fit your specific business needs, ensuring that while you’re keeping the bad actors out, your legitimate customers enjoy a smooth and secure experience.
Case Studies: Real-World Applications of Velocity Checks
E-commerce Retailer: Battling Card Testing Attacks
Imagine an e-commerce retailer that specializes in selling high-end electronics. The business was thriving, but with success came new challenges. One of the most pressing issues was a wave of card testing attacks that seemed to come out of nowhere. Fraudsters had begun using stolen credit card details to make numerous small purchases on the site—each transaction typically only a few dollars. While these amounts might seem insignificant, the sheer volume of transactions was overwhelming the retailer’s payment system, leading to a host of problems.
Card testing is a common tactic used by criminals to verify whether a stolen card is still active. If the small transactions go through, the fraudster knows the card is live and can then use it for larger, more damaging purchases elsewhere. For the retailer, these small transactions were adding up quickly, not just in terms of financial loss, but also in operational headaches. The payment processor started flagging the retailer for high chargeback rates, which could lead to penalties, higher fees, or even the loss of their merchant account.
To combat this, the retailer turned to velocity checks. By implementing velocity checks, they set specific thresholds—such as limiting the number of transactions allowed from the same credit card within a given time frame. Almost immediately, the retailer began to see a difference. Transactions that previously would have slipped through were now being flagged for review or blocked outright. The system was able to identify and halt suspicious activity in real-time, allowing the retailer to significantly reduce their exposure to fraud. Not only did this protect their bottom line, but it also helped them maintain a healthier relationship with their payment processor by lowering their chargeback rates.
Subscription-Based Business: Preventing Recurring Payment Fraud
Now, consider a subscription-based business that offers a monthly service, like streaming video or digital publications. This type of business model is particularly appealing to fraudsters because it allows them to exploit stolen credit card information over an extended period. The company in question was noticing an uptick in fraudulent sign-ups—criminals were using stolen cards to create accounts, often using the service for a few months before the fraud was detected, leaving the business to deal with the resulting chargebacks and financial losses.
Recurring payment fraud is tricky because it often goes unnoticed for longer periods, and by the time it’s caught, the damage is already done. The company needed a way to monitor and control the frequency of subscription sign-ups to flag suspicious activity before it could escalate.
This is where velocity checks came into play. The business set up velocity checks to monitor the frequency of new subscriptions from the same IP address or payment method. If a certain number of sign-ups were attempted within a short period, the system would flag it as suspicious. Additionally, they adjusted their velocity checks to look for patterns, such as multiple sign-ups with similar email addresses or slight variations in customer information—common tactics used by fraudsters to create multiple accounts.
With these measures in place, the company was able to catch fraudulent sign-ups early, often before the first subscription payment was even processed. This not only saved them money on chargebacks but also protected their service from being exploited by unauthorized users. The result was a more secure subscription process, allowing the business to grow its legitimate customer base without the looming threat of recurring payment fraud.
High-Volume Merchant: Managing Fraud Without Disrupting Sales
Finally, let’s take a look at a high-volume merchant—say, a large online retailer processing thousands of transactions daily. For such a business, managing fraud is a constant challenge, but so is ensuring that legitimate transactions aren’t interrupted. Initially, implementing velocity checks seemed daunting. The business worried that setting thresholds too low might result in a flood of false positives, which could slow down their sales and frustrate customers. On the other hand, setting them too high might allow fraudulent transactions to slip through.
This is where Durango Merchant Services stepped in to help. Understanding the unique needs of a high-volume business, Durango assisted the merchant in customizing their velocity check settings. They worked together to analyze the company’s transaction patterns, identifying times of day or specific products that might be more prone to fraud attempts. Based on this data, they tailored the velocity checks to accommodate the large transaction volume while still effectively preventing fraud.
For instance, they set different thresholds depending on the type of transaction—lower limits for higher-risk items like gift cards and higher limits for low-risk products. They also implemented additional layers of verification for transactions flagged by velocity checks, such as requiring a second form of authentication or a manual review by the fraud prevention team.
The results were impressive. The merchant was able to maintain a smooth sales flow, even during peak shopping periods, without sacrificing security. Fraud attempts were identified and blocked in real-time, reducing chargebacks and protecting their revenue. The business continued to grow, confident that their velocity checks were doing their job—keeping out the fraudsters while letting legitimate customers shop with ease.
In all these cases, velocity checks proved to be an invaluable tool in the fight against fraud, tailored to meet the specific challenges of each business. By working with experts like Durango Merchant Services, these companies were able to fine-tune their fraud prevention strategies, striking the perfect balance between security and customer satisfaction.
How Durango Pay Gateway and Fluid Pay Support Velocity Checks
Getting started with velocity checks is easy when you partner with Durango Merchant Services. Their team will guide you through the setup process, helping you configure your settings to best protect your business. Whether you’re new to velocity checks or looking to refine your existing setup, Durango Merchant Services offers the expertise you need.
Once your velocity checks are in place, Durango Merchant Services doesn’t just leave you to fend for yourself. They provide ongoing support to help you monitor and adjust your settings as needed. With their help, you can ensure that your velocity checks remain effective over time, adapting to new challenges as your business grows.
If you’re interested in learning more about velocity checks and how they can benefit your business, or if you need assistance with setup and optimization, reach out to Durango Merchant Services today. They offer a wealth of resources and expert guidance to help you stay one step ahead of fraudsters and keep your business secure.
Durango Merchant Services is Here to Make Sure You Can Continue to Process Electronic Payments.
1. High-Risk Merchant Services Expertise
Durango Merchant Services specializes in providing payment solutions for high-risk businesses, which often face challenges with traditional payment processors like Stripe. This expertise means they are well-equipped to handle industries and business models that might be flagged as high-risk, ensuring you have a reliable payment processing partner even if you’ve faced account closures elsewhere.
2. Flexible Payment Gateway Options
Durango Merchant Services offers flexible and customizable payment gateway solutions. Whether you need a gateway that supports advanced fraud prevention tools, recurring billing, or multi-currency processing, Durango has options to fit your needs. Their gateways can be integrated seamlessly into your existing systems, reducing the hassle of transitioning from Stripe.
3. Gateway Emulator Feature
One of the standout features of the Durango Pay Gateway is the gateway emulator, which allows you to switch to Durango’s services without extensive reprogramming. This tool emulates the behavior of your previous gateway, making the transition smooth and minimizing disruption to your business operations.
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Durango Merchant Services prides itself on offering personalized customer support. Unlike the often impersonal service provided by large payment processors, Durango assigns dedicated account managers to help you navigate any issues and optimize your payment processing setup. This hands-on support can be invaluable, especially if you’ve recently faced the challenges of an account closure.
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Durango provides robust fraud prevention tools and services, helping you protect your business from chargebacks and fraudulent transactions. Their advanced monitoring systems and customizable security settings ensure that your transactions are secure, giving you peace of mind and reducing the risk of future account closures.
6. Competitive Rates and Transparent Pricing
Durango offers competitive processing rates and transparent pricing structures. They work with you to create a pricing plan that suits your business model, potentially lowering your processing costs compared to what you might have experienced with another processor.
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With Durango, you can offer a wide range of payment options to your customers, including ACH, e-checks, and various credit card types. This flexibility can help you cater to a broader customer base and improve your overall sales.
8. Experience with Recovery and Transition
Durango Merchant Services has extensive experience helping businesses recover from account closures and transitions. Their team can provide strategic advice and practical solutions to get your payment processing back on track quickly and efficiently.
Switching to Durango Merchant Services after a Stripe account closure can provide stability, support, and flexibility. Their expertise in high-risk industries, combined with robust fraud prevention tools, competitive pricing, and dedicated customer service, makes us a strong alternative for businesses looking to secure their payment processing and avoid future disruptions.
For more information, visit Durango Merchant Services.
