Velocity Check

Velocity checks are a crucial fraud prevention tool used in e-commerce to detect and thwart fraudulent activities, particularly those involving the use of stolen credit card information. This method involves analyzing the frequency and patterns of transactions to identify abnormal behaviors that may indicate fraud.

The principle behind velocity checks is to monitor for multiple transaction attempts that occur within a short period of time, using the same credit card number or originating from the same IP address. This pattern is often indicative of "card testing," where fraudsters make small purchases to determine if the stolen credit card information is still active and has not been flagged. Once they confirm the card's validity, they may attempt larger fraudulent transactions.

Velocity checks can also detect attempts to spread out many small transactions over different sites or merchants to circumvent detection. By setting thresholds for the number and speed of transactions allowed from a single card or IP address, e-commerce platforms can automatically flag and review potentially suspicious activities. For example, if a card is used to attempt multiple transactions across various merchants within minutes, the system can alert the merchant or temporarily block further transactions pending further investigation.

Implementing velocity checks helps e-commerce merchants minimize the risk of fraud, protect their revenue, and maintain the integrity of their payment systems. It also contributes to safeguarding customer trust by actively preventing fraud on their platforms. This method is a part of a broader strategy of layered security measures that include encryption, secure payment gateways, and real-time monitoring systems to create a robust defense against increasingly sophisticated online fraud tactics.