The growth of ecommerce and online transactions has increased the likelihood of payment fraud and financial losses. To mitigate these risks, businesses use fraud detection tools that identify bad actors and block malicious behavior. One of the most effective tools is an IP address fraud score.

An IP address fraud score is a number that represents the probability of fraudulent activity connected to a specific internet-connected device. The score is based on a variety of factors, including the location of an IP address, the frequency and volume of transactions associated with it, and whether it has been previously flagged for suspicious behavior. The score also takes into account whether the device used to make a transaction is running a virtual private network or is a public internet service.

Understanding IP Address Fraud Scores: Assessing Risk and Enhancing Security

The use of an IP address fraud score can help minimize a company’s loss of revenue to chargeback fraud. Chargeback fraud occurs when a person contacts their card issuer to claim that they never received an item or that it was defective. A business that uses an IP address fraud score can prevent these issues by identifying customers who may be engaging in unauthorized activity and blocking them from making additional purchases.

In addition to preventing ecommerce fraud, an IP address fraud score can be used to detect other types of fraud. For example, an IP address fraud score can be used by banks and credit unions to evaluate potential identity theft. The score can also be used to determine if an individual is using a proxy or VPN, which can help a company avoid allowing their site access to people who are trying to hide their true identity.