Blog and Updates

How Payment Gateways Protect Your Business from Fraudulent Transactions?

June 03, 2019

By: Tania M. Voss


Online Fraud

Online fraud may not be a problem for startups processing only a few transactions each day. However, as your business grows and card transactions become the norm, ignoring the risks can turn into a terribly expensive mistake. In fact, according to Statista, US merchants suffered an estimated loss of 6.4 billion dollars in payment card fraud in 2018.

Some processors give merchants basic security measures, but others don’t, especially in the sale of digital goods and services. Thus, before you choose a payment gateway for your business needs, finding out how you will be protected as a seller should be a priority. These are the most effective tools and techniques that Payment Gateways use to protect businesses from fraud:

  1. Card Verification Value (CVV) Filter

As the unique, 3 to 4-digit codes are (and should be) never stored in the merchant’s database unless the implementation has been assessed as PCI DSS certified, and are only present on the printed version of a credit card, processors employ CVV filters along with other required information for security and fraud protection. Simply knowing the account or card number can’t retrieve the code, because it is based on the data on the magnetic strip on the back of the card. If the customer can’t provide the correct CVV, you need to let your payment gateway decline the transaction.

  1. Velocity Check

This smart fraud identification tool always works a step ahead of possible losses. It monitors dubious patterns from repeated transactions. These can be within the span of a week, to monthly repeated purchases. The data points set up for velocity checks can vary between businesses, depending on their industry. This is why it’s important to choose the right Payment Gateway that will educate you with online security measures, and set up the latest risk management tools for you.

These are the most common data set up for velocity check:

  • Number of transactions from the same account in one day/week/month
  • Amount spent by the same account in a day/week/month
  • Username/User ID
  • E-mail address
  • IP Address
  • Billing and Shipping Address
  • Credit card number
  • Phone number
  • Device ID/signature
  1. Payer Authentication/ Verified by Visa/ MasterCard Secure Code (3D Secure)

One of the most in-demand fraud prevention method, the 3D Secure authentication lets cardholders create a PIN to use during checkout to confirm identity. Implementing this tool also provides lower interchange rates and chargeback protection.

  1. Address Verification Service (AVS)

Your customer will be asked to provide a billing address, and an AVS checks if it matches with the address on the issuing bank’s file. Your payment gateway can also send a user verification request to the issuing bank as part of a card-not-present transaction. The AVS then replies with a code. If the addresses don’t match, you can either check the CVV, email address, and IP address, or let the payment gateway decline the transaction.

  1. Device Identification

All devices - smartphones, tablets, computers - have a unique ID which is hard to impersonate, helping payment gateways identify fraud patterns and gauge fraud risks. Device identification profiles and analyzes the device used to visit your e-commerce site, monitoring the operation system, internet connection, and browser. If the device has been associated with suspicious activity, the transaction can either be flagged or declined. 

  1. Risk Scoring Assessment

Risk scoring assessment is designed to detect fraudulent transactions based on your set criteria, such as AVS test, IP range, and more. When a customer pays on your website, the tools will identify the probability of the transaction being safe or fraudulent, so you can evaluate the order and properly decide whether to accept, flag, or decline the transaction. You can also take advantage of lockout mechanisms to block or disable transactions that fail your criteria.


Looking for a payment gateway that guarantees safe, secure, and seamless transactions? AltPayNet can help you out. We understand how important it is to provide protection not only for your business, but also for your customers to build trust and loyalty. That’s why we offer risk management services, payment gateway technology, and cybersecurity solutions, among others. Send us a message to learn more.