Fraud Prevention API Explained - Benefits of Using Fraud Detection APIs

Fraud Prevention APIs help companies mitigate risk in real-time by preventing fraud such as detecting fake accounts, preventing chargebacks, bad users, account takeover (ATO), bots, and similar abuse.

Using A Fraud Prevention API To Detect Fraud

A fraud detection API is a prerequisite for any online businesses that needs to mitigate fraud, detect abuse, and prevent risky behavior in real-time. Online companies can benefit from using a fraud prevention API across any industry from SaaS, gaming, ecommerce, banking, etc. Here's why.

In the past few years, there's been an explosion of SaaS companies and a shift towards ecommerce. The pandemic made the switch much more drastic, but even before 2020, the world was already shifting. Contactless shopping and payments were becoming more attractive, especially to the younger demographics.

Fraud Prevention API

Ecommerce made procuring goods and services easier. The damages of the pandemic would have been a lot worse without online transactions. And for some businesses, it meant unprecedented growth and expansion.

However, with these advantages comes one major disadvantage — fraud. The rates of identity theft and credit card fraud have skyrocketed in the past few years.

Statistics show that there was a 113% increase in the number of identity theft cases from 2019 to 2020. Credit card fraud also had a tally increase of 48% in that same period. And this trend doesn't seem to show any signs of stopping.

That is why businesses are turning to similar methods to detect and prevent fraud. While there are many, one of the best forms is using a fraud prevention API.

What Are Fraud Prevention APIs?

An API or application programming interface is software that allows for seamless communication and integration between two systems (usually websites or apps). Through an API, data is transmitted quickly from one site to another and vise-versa using well known protocols.

Fraud prevention APIs use this seamless data transfer to analyze information in real-time to detect fraud. User data can be quickly passed through a risk assessment, while higher risk users or payments can be subjected to additional verification or screening.

This strategy is most efficient to mitigate risk in real-time and prevent bots or bad actors from creating accounts or making payments with fraudulent credit cards. With these tools, you can scrutinize lots of information quickly and ensure that your customers are safe. Manual safety checks are not as quick, fast, or secure as fraud detection APIs.

How Does It Detect Fraud?

Fraud prevention APIs need access to some customer data, and some API endpoints are specifically designed for one type of data such as our email address risk analysis to identify suspicious email addresses and our phone number fraud prevention API which can identify high risk phone numbers. This is data you are probably already storing to enhance your user experience, so there's usually no need to employ additional data gathering steps.

These APIs connect your website to fraud detection systems which analyze user data, payment details, and behavior signals to detect fraudulent users and payments made with stolen credit cards. These tools need two sources of data to work effectively. They are:

  • Customer-submitted data: This is information that your users themselves give. These include names, email addresses, phone numbers, and similar contact details.
  • Digital Footprint Analysis: Every user on your website has a unique digital footprint that defines them. These include their IP address, device ID, browser used to access your site, operating system, location, and so much more. A device fingerprinting solution can enrich device data with intelligent risk analysis.

There are special tools to procure the user's digital footprint, but the customer data has to come from your site, and this is where the fraud prevention API comes in. They transfer the information seamlessly. These include:

  • Sign Up Data: When users sign up to your site, they input much of their personal information. This is stored to give the user a better experience, but it is just as essential to prevent fraud.
  • Login: As users move through the login or sign up process, IPQS can help identify fake registrations, duplicate accounts, and high risk users with tools like email fraud prevention.
  • Transactions: During transactions, customer data is collected, which is necessary for these tools. This billing data can then be processed through the transaction screening API for further payment risk analysis to detect chargebacks or unauthorized payments.
  • Certain Other Activities: Activities like deposits, withdrawals, transfers, and chargebacks all keep information in the database. The API uses this to prevent fraud.

The API transmits this data to the fraud detection system your company uses. This system would analyze this customer-submitted data and the digital footprint. It enriches the data and is then able to assign a risk score to each incoming transaction.

Once this is done, you can manually decide to approve or decline the transaction based on the risk score assigned. You could also set some additional authentication tasks for the user to enable you to make a decision.

Does Your Business Need A Fraud Prevention API?

The short answer: Yes, you do.

The long one is that a fraud prevention API helps you and your company. These tools automate the process of detecting fraud, freeing up resources on your term and preventing issues that could impact ROI such as chargeback fees, refunds, duplicate accounts or similar abuse. That, in turn, brings in more clients.

These fraud detection APIs also prevent you from losing money. When credit card fraud is committed on your site and reported, a chargeback is processed to refund the money to the original card owner. IPQS can prevent credit card chargebacks using state of the art technology for uncovering location spoofing, emulators, bots, and similar abuse.

Account Origination Abuse can also be a headache. When fraudsters attempt to abuse a service, bonus offers, or loyalty programs, it can be challenging to prevent fake accounts.

IPQS makes it easy to quickly validate users with as little as an email address or IP address.

With a fraud detection API, you can prevent fraud by automatically flagging risky users and payments. You can even defend your site from bots with advanced bot management.

Benefits Of Fraud Prevention APIs?

Customers are the life of every establishment. That is why customer security in online businesses is given a high priority. If not fraud detection APIs, you can employ manual methods to detect fraud.

However, here are the advantages of using a fraud prevention API solution over manual methods.

  1. Automation: With a fraud detection API, much of the stress of transaction security is taken off your shoulders. The service also works around the clock to protect your sites from malicious abuse, including mitigating credential stuffing attacks.
  2. Easy Integration To Your Site: These systems and their APIs are usually relatively easy to put into your website. They also don't require much training to operate.
  3. Cost Conservation: When you use these tools to prevent fraud, you don't need to employ teams of specialists like you would in the manual process. A good fraud detection API can do the work and get it done quicker. For example, our proxy detection API service can automatically filter proxies, VPNs, and TOR connections to block abusive users.
  4. Scalability: These tools can handle the information of large and small businesses with little or no reduction in speed. So, no matter how much you expand, you can always detect fraud with the same tool.
  5. Flexibility: Every business has its unique requirements in security. The owners can easily customize their fraud detection APIs to fit the parameters required for your business.


You can see that a sophisticated fraud detection API would not only prevent fraud but reduce your workload and bring profit. If you aren't using one already, you should probably do so quickly. The ability to analyze transactions and detect fraud in a split second would be a lifesaver for your business.

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