Voice of the Industry

The importance of effective data enrichment and aggregation when developing a fraud prevention

Monday 21 March 2022 09:45 CET | Editor: Irina Ionescu | Voice of the industry

Orcun Akca and Son Nguyen from Allyiz explain how collecting and processing data can deliver a strong protection against fraud

The increase of online purchasing is further amplified as consumer behaviour continues to shift towards a digital-first mindset. Global ecommerce sales are set to rise to USD 4.921 trillion in 2021, which is a considerable 25.7% increase from 2020 sales projections. This surge in online purchasing has driven fraudsters to target merchants that lack the resources to prevent fraud. Recent findings uncovered that merchants are at risk of losing over USD 20 billion in 2021 due to online fraudulent activities, an 18% increase, compared to USD 17.5 billion recorded last year. To address fraudulent activity, merchants need to consider the importance of data enrichment and aggregation when planning their fraud prevention strategy.

Data-driven results

Robust data analytics is one of the main pillars of fraud prevention, detection, and investigation. To establish robust data analytics functions, data quality and aggregation become increasingly important to connect the dots between data points and evolving risk.

The number of data points produced by consumers is staggering, with estimates suggesting that 2.5 quintillion bytes (2.5 e+9 GB) of data is created daily. This is 2.5 quintillion bytes of data that must be acquired, curated, processed, categorised, and contextualised.

The internal data points were not enough to paint a clear picture of their customers. With the enrichment and aggregation of data, merchants have a sharper image of their customer, enabling them to distinguish between genuine and fraudulent players. 

Many merchants have done well to collect and utilise data from their own activities, however, a few have realised the full potential of linking internal data with a third-party, vendor or public data sources. Overlooking external data is a missed opportunity as it significantly complements an internal dataset.

Several external providers offer data ranging from marketing databases, mobile phone operators, real-time localisation technology, card bin numbers, IP addresses, network routes, devices, digital identity, utility providers, to complement a merchant’s existing dataset. A good example of an external data provider offering their capabilities to enrich a primary dataset is a telecom provider giving more information about a customer’s mobile phone usage, i.e. more insight is obtained if you know that a specific phone number has been recently activated, is a prepaid phone number, and isn’t located in your home market. This type of data is not readily available unless obtained via an external data provider.

Structuring data smartly

All customer data collected by a merchant is in its raw form. By enriching the data, which is the data intelligence process of converting unstructured, low-quality internal and external data into high quality and usable information, merchants obtain in-depth insight into their customers’ lives. Types of data enrichment include behavioural, demographic, and geographical. However, this data enrichment is only a snapshot in time of a customer’s journey and needs to be continuously updated to ensure it remains relevant. A well-oiled data enrichment process is essential for merchants as more accurate information leads to a better customer experience, which ultimately creates more data, brand loyalty, increased revenues, customer retention, and improved fraud prevention.

Reducing the false positive rate

Merchants continue to lose billions of dollars by blocking fraud incorrectly than actual fraud. The more data points merchants have at their disposal the better accuracy there is for predicting risk and reducing their false positive rate which is the differentiating between good vs risky behaviour. To achieve this, merchants need to establish smarter filters that realise the context of transactions at checkout in real-time. The most effective risk management method is data enrichment. There are multiple details and connections in each transaction, which when viewed independently might seem insignificant. However, through data aggregation and link analysis, a clearer image emerges, resulting in a highly accurate fraud prevention solution. The aggregation of the standard points of data from a transaction is enriched with additional data points to track the behavioural signals and assign a probability, resulting in a decision to either accept or decline, resulting in the reduction of the false positive rate.

The art of aggregation

Data aggregation pulls together information from multiple sources to various patterns to determine the risk level of a transaction. It is imperative that aggregated data isn’t just reliable but is also available in real time and returned quickly. Similarly, it is important to first define the correct granularity of the aggregation and to periodically test its relevance due to continuous progress being made within the industry regarding profiling algorithms and methods. By implementing an aggregation process, merchants not only save on costs and processing time but also increase accuracy in risk mitigation. It is important to emphasise that each piece of data must follow a quality process and fraud teams should focus their efforts on effective data that will complement their fraud prevention strategy as an influx of information may lead to weak results if insufficiently processed.

Developing a sound fraud prevention strategy

By analysing customer touchpoints and user behaviour, merchants are realising the benefits of utilising internal and external data to make better decisions when it comes to fraud prevention. As merchants continue to focus on their core business, they can rely on external expert fraud prevention strategists to tailor a risk strategy that incorporates the importance of data to handle risk more effectively and drive more accurate decision making.

Click here to learn more about how fraud prevention experts can assist with building your risk management strategy.

This editorial is part of The Fraud Prevention in Ecommerce Report 2021/2022, the ultimate source of knowledge that delves into the evolutionary trail of the payments fraud ecosystem, revealing the most effective security methods for businesses to win the battle against bad actors.

About Orcun Akca

Orcun has over 18 years of experience in the payments and fraud prevention industry with in-depth knowledge of online payments and ecommerce risk management.


About Son Nguyen

Son is an experienced specialist with over 20 years of experience in the payment and fraud sector for ecommerce and banks.

About Allyiz

Allyiz is the ‘go-to’ company for businesses to source knowledge, time or people with expertise in payments and more. We offer a broad range of services both on strategic and operational levels in the fields of payments, risk management, marketing, education, and people leadership. We bring the experience of professionals who have successfully run the function on the business side and have done it well many times. Our purpose is to deliver actionable results fast.

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Keywords: fraud management, fraud detection, fraud prevention, payment fraud, fraud platform, online fraud, ecommerce
Categories: Fraud & Financial Crime
Countries: World
This article is part of category

Fraud & Financial Crime