With online businesses and platforms on the rise, customers are at a higher risk of cyberattacks, leading to payment fraud, identity theft, and other fraudulent activities.
Hence, finding innovative solutions to such problems has become an urgent call for fraud prevention specialists, leading to some interesting findings.
One technology that can help us is IP geolocation. Using this, e-commerce businesses and online retailers can significantly reduce payment fraud by detecting anomalies in shopping patterns, usage of VPNs or proxies, etc.
How is this technology truly responsible for preventing online payment fraud? Let’s find out the detailed answer to this question (and more) in this article.
Understanding IP Geolocation Technology
Since every device connected to the internet has a unique IP address, the IP geolocation technology leverages this information to determine the approximate geographical location of the user.
This means that when a customer tries to buy something from an online platform, their internet protocol (IP) address is pinged to the retailer, revealing the users’ region and country. Some programs also allow you to see specific latitude and longitude coordinates of the user, adding more context and detail to the situation.
While IP geolocation may not provide pinpoint accuracy, it can deliver highly valuable data for identifying unusual patterns of behavior and potential fraud attempts. How, may you ask? Well, consider the example below for a better understanding of this concept.
Example Scenario:
A Turkish customer buys from a US-based shopping store regularly. However, one day, the payment method registered against the user was used from a location in Far-east Russia. This suspicious activity will trigger automatic alarms (if any) installed on the online platform that a payment fraud might be underway and halt the transaction before anything goes bad.
As you can see, IP geolocation technology helps you realize certain problems that were before hidden in plain sight.
Ways IP Geolocation Helps Prevent Payment Frauds
Below are some ways in which businesses can use geolocation technology effectively to combat payment fraud.
1. Helps Flag High-Risk Transactions:
IP geolocation can alert fraud detection systems when an IP address doesn’t align with the customer’s billing information.
For instance, a payment initiated from an IP address in one country but linked to a billing address in another country could be flagged for manual review.
2. Facilitates in identifying Proxy and VPN Use:
IP geolocation allows you to see if a fraudster is using VPNs, proxies, or Tor networks to disguise their location or identity. This can help you block fraudulent activities and safeguard your platforms as well as the customer’s peace of mind.
3. Aids in Enhancing Geo-Fencing:
By leveraging the IP geolocation technology, businesses can limit transactions to specific countries or regions.
For example, if an e-commerce store primarily serves North America. Then, transactions from outside this region can automatically trigger additional verification steps.
4. Provides Real-Time Monitoring Capabilities:
Geolocation tools work in real-time, allowing businesses to address threats as they arise. When a transaction appears suspicious, you can pause it and request additional user verification with no delays.
Implementing IP Geolocation on Your Platforms
Implementing IP geolocation on your platforms is not a difficult process. However, it may require a little bit of manual input to work harmoniously with the automated systems in place.
For starters, you can use the IP Geolocation tool to detect anomalies and suspicious behavior during payment transactions by matching users’ locations against their normal ones.
Other than that, you can use extensions on WordPress and hosting sites like GeoIP Detection, IP2Location Country Blocker, etc., if you don’t have any previous record of the user’s activities.
Leveraging the smart algorithms installed in these extensions, your site may automatically block suspicious users with mismatched payment information or those from high-risk regions.
Later, you can manually review these transactions or put in place prompts for MFA (Multi-factor Authorization) to approve the purchase.
Benefits of Implementing IP Geolocation
As we’ve hinted above, there are many benefits of implementing IP Geolocation on your online platforms. For your convenience, we’ve discussed some of them below in more detail.
1. Enhanced Security:
IP Geolocation adds an extra layer of defense to prevent fraud by triggering MFA (Multifactor Authorization) and other procedures. This protects your business and your customers’ sensitive information, ensuring a safe online marketplace for everyone.
2. Reduced Chargebacks:
Identifying fraudulent transactions before they’re processed minimizes the risk of chargebacks. This saves a lot of money and hassle for your business, allowing you to boost productivity and focus on things that truly matter.
3. Better Customer Trust:
When customers feel that their payment information is safe, they are more likely to trust and shop with your brand again. This also improves your brand reputation, motivating more users to check out your company.
How to Choose the Right IP Geolocation Services Provider?
Getting confused about which IP geolocation provider to choose is a common problem since there are many options out there. However, we’ve drafted some general guidelines to help you out with this process.
- Accuracy: Look for providers that utilize multiple data sources to provide reliable and up-to-date information about users’ location, coordinates, etc.
- Integration: Ensure the service integrates seamlessly with your existing fraud prevention systems and workflows to avoid any problems in the future.
- Customization: Choose a provider that allows you to configure rules and thresholds for geofencing to better suit your business needs.
- Cost: Evaluate pricing and ensure that the solutions align with your budget and expected ROI. If in need, there’s no problem in trying out free software and tools first before making an investment leap.
Final Words
While cybercriminals and hackers have become quite advanced in the past few years, there are always innovative ways to protect your brand and customers from fraudulent activities. One of which is leveraging IP geolocation technology and tools/software that facilitate its implementation.
By understanding the basics of IP Geolocation, you can understand how it can be best used for protecting your online payments. However, it is always recommended to keep exploring options for utilities to find the best fit according to your needs.