Fraud Scoring

Fraud Scoring is a sophisticated risk management technique employed by financial institutions and payment processors to assess the likelihood of a transaction being fraudulent. This predictive modeling system uses a variety of factors, including transaction history, customer behavior, and anomaly detection algorithms, to assign a numerical score to each transaction. The score reflects the perceived risk level, enabling quick and accurate identification of potentially fraudulent activities.

The process involves a software or service analyzing patterns and deviations from normal behavior, such as unusual transaction amounts, atypical locations, or multiple consecutive transactions in a short timeframe. Based on the assigned score, transactions are categorized as low, medium, or high risk. This allows prioritizing the response and focusing resources on investigating transactions with higher fraud scores.

Fraud Scoring plays a crucial role in enhancing the efficiency of fraud detection systems, helping payment solutions and merchants strike a balance between minimizing false positives and effectively identifying and preventing fraudulent transactions in real time.