Fraud monitoring
Cardflo's fraud monitoring services provide continuous oversight of your transaction landscape. We track patterns, identify anomalies, and alert you to potential fraud risks as they emerge.
Proactive monitoring helps high-risk and enterprise merchants maintain security and minimise financial losses.
- Category
- Risk
- Capabilities
- 10
- Available on
- All plans
The overview
Fraud monitoring involves the continuous observation of transaction data within the payment gateway and acquirer systems to detect unauthorised activity. This process sits between the initial authorisation request and the final settlement, acting as a filter for high-risk behaviour.
By analysing data points such as IP addresses, device identifiers, and velocity patterns, monitoring systems assess the risk level of each transaction.
For enterprise and high-risk merchants, this oversight is critical to maintaining low dispute ratios and protecting the Merchant Identification Number (MID) from scheme penalties. Monitoring mechanisms often integrate with 3-D Secure 2 protocols to provide a balance between rigorous security and a friction-minimised checkout experience.
These systems typically generate alerts or trigger automated workflows based on pre-defined risk appetites, ensuring that suspicious events are flagged for either immediate refusal or manual review by risk analysts before funds are captured.
How it works
Data ingestion and profiling
The system begins by aggregating transactional metadata, including the Bank Identification Number, Merchant Category Code, and customer location.
This data is compared against historical benchmarks to establish a baseline for normal purchase behaviour, allowing the engine to recognise deviations that indicate potential card-not-present fraud or account takeover attempts.
Velocity and pattern analysis
Real-time checks monitor the frequency of transactions from specific cards or IP addresses over set timeframes. Rapid successions of low-value attempts, often associated with card testing, trigger automatic flags.
These velocity rules help identify automated bot attacks that might bypass simpler static filters.
Risk scoring and decisioning
Every transaction is assigned a numerical risk score based on its characteristics. Low scores allow for immediate authorisation, whilst high scores result in an automatic decline.
Transactions falling into a middle threshold may be routed to a manual review queue or challenged via Strong Customer Authentication.
Post-authorisation outcome tracking
The monitoring process extends beyond the point of sale by tracking the lifecycle of the transaction. By linking disputes and retrieval requests back to the original authorisation data, the system refines its detection models to recognise similar fraudulent profiles in the future, improving long-term accuracy.
Why it matters
Card scheme compliance
Visa and Mastercard operate formal monitoring programmes that penalise merchants with high fraud or chargeback ratios. Sustained breaches of these thresholds can lead to increased scheme fees, mandatory fines, or the eventual termination of the merchant account.
Robust monitoring keeps these metrics within acceptable limits, ensuring the longevity of the processing relationship with the acquirer.
Operational cost reduction
Fraudulent transactions result in direct financial loss through the loss of physical stock and the non-refundable nature of processing fees. Furthermore, each chargeback incurs administrative costs and potential representment fees.
Proactive monitoring identifies these risks before they escalate, minimising the operational burden of managing disputes and manual dunning processes.
Merchant account stability
Acquirers assess the risk profile of a business based on its fraud history. A merchant that demonstrates active oversight of its transaction stream is viewed more favourably during periodic KYB reviews.
This stability is vital for securing competitive interchange-plus pricing and avoiding the imposition of a rolling reserve on settlement funds.
Use cases
High-growth e-commerce
Scaling retailers use monitoring to prevent mass card testing attacks during sales events, where high volumes can otherwise mask clusters of fraudulent activity.
Cross-border marketplaces
Businesses operating across multiple jurisdictions apply monitoring to manage the higher inherent risk levels associated with specific geographic regions and currency fluctuations.
Digital goods and subscriptions
Providers of instant-delivery digital assets use real-time monitoring to block unauthorised access before the item is consumed and the revenue is lost.
B2B wholesale platforms
Platforms processing high-value corporate orders monitor for account takeover signs and unusual changes in corporate card spending patterns to prevent substantial credit losses.
By the numbers
Industry benchmarks suggest that active monitoring and risk scoring can reduce the volume of fraudulent disputes within this range compared to unmonitored processing.
Standard industry practice aims to keep manual review rates below this percentage of total volume to maintain operational efficiency and cardholder satisfaction.
Modern risk engines typically perform automated checks within this timeframe to ensure the payment authorisation process is not visibly delayed for the end user.
Related terms
Talk to our team about a live rollout on your acquiring stack.
What you get with Fraud monitoring
- Automatic identification of abnormal transaction velocity across multiple merchant identification numbers.
- Real-time IP geolocation checks to flag discrepancies between shipping and billing addresses.
- Integration with 3-D Secure to challenge high-risk requests while favouring friction-free paths.
- Customisable rule sets based on specific Merchant Category Codes and industry risk profiles.
- Automated alerts for retrieval requests to enable early intervention before a formal dispute.
- Analysis of Bank Identification Number data to detect high-risk or prepaid card types.
- Detailed manual review queues for assessing suspicious transactions prior to funds capture.
- Historical trend reporting to identify shifts in fraud vectors over specific time periods.
- Detection of common card testing patterns such as rapid small-value authorisation attempts.
- Support for blacklisting and whitelisting specific attributes to refine detection accuracy.
A short scoping call, then a written plan for your MIDs.
Questions about Fraud monitoring
What is the difference between fraud monitoring and fraud prevention?
Fraud prevention typically refers to the tools that stop a transaction at the moment of checkout, such as CVV checks or 3-D Secure. Fraud monitoring is a broader, continuous process that analyses the entire transaction environment.
It includes real-time detection but also extends to post-authorisation analysis, trend reporting, and the identification of systemic vulnerabilities. Monitoring provides the data necessary to update prevention rules, ensuring the merchant stays ahead of evolving attack patterns used by fraudsters.
How does fraud monitoring impact the customer checkout experience?
Effective monitoring is designed to be largely invisible to the legitimate cardholder. By using passive data points such as device fingerprinting and velocity checks, most transactions can be validated without requiring additional input.
Only transactions that exceed a specific risk threshold are challenged with Strong Customer Authentication or diverted to manual review. This targeted approach prioritises security while minimising the abandonment that often results from excessive or unnecessary friction during the payment flow.
Can fraud monitoring prevent all chargebacks?
No system can guarantee the prevention of all chargebacks, particularly those resulting from 'friendly fraud' where the legitimate cardholder disputes a valid purchase. However, monitoring significantly reduces the probability of chargebacks linked to stolen credentials or unauthorised usage.
By identifying and blocking high-risk transactions before they are captured, merchants can lower their overall dispute ratio and maintain their standing within the card scheme monitoring programmes, such as the Visa Fraud Monitoring Programme.
What role does machine learning play in monitoring transaction risk?
Machine learning identifies non-linear relationships between variables that static, rule-based systems might miss. For example, a machine learning model might recognise that a specific combination of email domain, time of day, and browser version correlates with a high fraud probability in a particular region.
These models are trained on vast datasets of both fraudulent and legitimate transactions, allowing them to adapt to new behaviours. This reduces the number of false positives compared to rigid, manual thresholds.
Why is manual review still necessary if I have automated monitoring?
Automated systems specialise in making split-second decisions based on clear patterns. However, certain transactions may be genuinely ambiguous, such as a high-value purchase from a long-standing customer using a new device in a different country.
A manual review allows a trained analyst to apply human judgement and potentially request further verification from the customer. This prevents the loss of legitimate revenue that might otherwise be blocked by an overly cautious automated decline.
How are thresholds determined for flagging suspicious activity?
Thresholds are typically set based on a combination of industry standards for the specific Merchant Category Code and the individual business's risk tolerance.
A high-margin luxury retailer might accept a higher false-positive rate to ensure maximum security, whereas a low-margin digital service may prioritise volume and accept slightly higher risk.
These thresholds are regularly reviewed and adjusted based on the performance of the rules and the evolving nature of the threats detected in the processing environment.
Related features.
Ready for velocity?
Tell us about your business. We'll match you with the right acquiring partners and the right route, typically inside a week.