Fraudulent transactions are a growing concern for businesses worldwide, with global payment fraud losses expected to reach $40.62 billion by 2027 (Statista). From chargebacks to stolen credit cards, merchants face an ongoing battle against transactional fraud.
But how can you spot high-risk transactions before they cause financial damage? In this guide, we’ll break down:
- What makes a transaction high-risk
- The red flags to watch for
- How businesses can monitor and prevent fraud
- The role of public records verification in fraud prevention
What Makes a Transaction High-Risk?
A high-risk transaction is one that has a greater chance of fraud, chargebacks, or regulatory scrutiny. These transactions often come from suspicious sources, involve unusual behavior, or originate in high-risk industries.
Key Characteristics of High-Risk Transactions:
- Large, unexpected purchases from new customers
- Multiple failed payment attempts before success
- Orders from high-risk countries known for fraud (e.g., Nigeria, Russia, Venezuela)
- Use of high-risk payment methods like prepaid debit cards or cryptocurrency
- Frequent chargeback history from the same customer
Businesses in high-risk industries, such as gambling, adult entertainment, and crypto trading, are more vulnerable to fraud and may require high-risk payment processors to manage transactions securely.
Red Flags That Indicate a High-Risk Transaction
Unusual Customer Behavior
- Rushed Transactions: Fraudsters try to complete payments quickly before detection.
- Mismatched Billing & Shipping Addresses: A common fraud sign where stolen card details are used.
- Same Customer, Different Payment Methods: Multiple payment cards for similar orders may indicate stolen data.
- Unusual Location: A customer based in one country making purchases with a card issued in another.
Transaction Pattern Anomalies
- High-value purchases from a first-time buyer
- Frequent small purchases leading to a large one (card testing method)
- Multiple purchases from the same IP address with different credit cards
Suspicious Customer Information
- Email addresses that look fake (random letters and numbers, e.g., xyz123@gmail.com)
- Phone numbers that don’t match the cardholder’s address
- Reluctance to provide additional verification when asked
How to Monitor and Prevent High-Risk Transactions
High-Risk Transaction Monitoring
Merchants should use AI-driven fraud detection tools that track purchase patterns, device information, and geolocation data. High-risk payment processors also offer fraud screening and chargeback protection to businesses that process large volumes of transactions in high-risk industries.
Verification Strategies to Reduce Fraud Risk
- Multi-Factor Authentication (MFA): Adds an extra layer of security before completing a transaction.
- Address Verification System (AVS): Checks whether the cardholder’s billing address matches the address on file with the bank.
- 3D Secure Technology: Requires an additional authentication step, reducing unauthorized card use.
The Role of Public Records in Fraud Prevention
While payment security tools can detect suspicious transactions, businesses need an extra layer of verification—especially for high-value purchases, vendor partnerships, and customer disputes.
Public records searches help businesses:
- Verify a customer’s identity before approving high-risk transactions
- Check a company’s legal status before processing large B2B transactions
- Review court records or fraud-related offenses linked to an individual
What to Do If You Spot a High-Risk Transaction?
If a transaction raises suspicion, follow these steps:
- Pause the transaction and flag it for manual review.
- Contact the customer for additional verification (e.g., government-issued ID, proof of address).
- Check fraud blacklists or databases for known scammers.
- Report fraudulent activity to your high-risk payment processor or financial institution.
If fraud occurs, chargeback prevention strategies can help recover lost revenue and prevent repeat offenses.
Stay Ahead of Fraud Before It Happens
Payment fraud is an ever-present risk, but businesses that proactively monitor transactions, implement strong verification processes, and use public records searches can significantly reduce their exposure.
- Monitor high-risk transactions in real time
- Use fraud prevention tools & high-risk payment gateways
- Verify identities using public records when needed
By staying vigilant, businesses can prevent fraud before it happens—saving money, reputation, and customer trust.
