October 16, 2013, 10:12 AM

How consumers’ social media actions can fight online fraud

Signifyd uses 120 data points to determine whether an order may be fraudulent.

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Startup Signifyd today launched a fraud prevention platform that evaluates e-commerce orders based on 120 data points, including those gathered from a consumer’s social media posts, to determine whether a transaction might be fraudulent.

The system attempts to tie together a consumer’s online and offline actions to help retailers reduce their exposure to chargebacks and fraud, says Raj Ramanand, co-founder and CEO of Signifyd. Chargebacks are payment transactions that payment card networks such as  Visa and MasterCard reverse, taking the funds from a merchant’s account. Typically this occurs after a legitimate cardholder denies making the purchase or claims the products were damaged or otherwise faulty, and the card companies conclude that the merchant was at fault.

Signifyd scores every order on its 1,000-point scale to enable retailers to assess the risk involved in approving the transaction.

“We know that people leave a lot of footprints behind,” Ramanand says. “We’re using those footprints to try to stop the people looking to commit fraud.”

For example, if a shopper with a French billing address makes a purchase from a San Francisco IP address, Signifyd’s system will automatically examine factors such as where the consumer’s card was issued and whether his Twitter account shows that he lives near San Francisco as it scores the transaction. If the shopper shares his San Francisco location on Twitter or he is tagged in Facebook photos that include a geolocation tag showing he is in San Francisco, the score will likely be high, which suggests the retailer should approve the transaction. Retailers can select to automatically approve transactions that score above a given point.

Signifyd doesn’t charge a set-up fee. It charges $79 a month for retailers to receive the vendor’s scores, or merchants can pay a transaction fee that ranges between 1% and 3% for Signifyd to guarantee that approved orders are not fraudulent. That guarantee covers the entire transaction.

Signifyd has helped GSM Nation, a retailer that sells contract-free mobile phones online, vastly increase the number of orders that it approves. Since it began working with Signifyd earlier this year, GSM Nation has increased its revenue by 15% and reduced its number of manual reviews 80% while keeping its fraud rate below 1%, says Ahmed Kattak, the retailer’s CEO.

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