What is Fraud Management?
Fraud management refers to the process of detecting, preventing, and responding to fraudulent activities in a business and creating effective preventive measures to deal with all forms of online fraud and fraudsters.
Modern fraud management is not just reactive, but proactive and strategic. It incorporates proactive risk analysis, identifying malicious intent and behaviour before fraud can occur.
In other words, fraud management is an approach taken to prevent fraudsters from exploiting loopholes in a platform by analyzing the intent of users accessing the platform and categorizing the level of risk they pose.
When it comes to fraud, digital businesses take the hardest hit, thanks to how quickly it happens and the fact that fraudsters don’t even need to be physically present to pull it off.
Why Fraud Management is Crucial for Digital Businesses
Digital businesses, especially those in fintech, e-commerce, and iGaming, face unique fraud challenges:
- Fraudsters don’t need physical access to attack
- Attacks can be automated and highly scalable
- Customer trust and regulatory compliance are always on the line
In these scenarios, fighting fraud is no longer optional, but a critical safeguard for growth, trust, and sustainability.
Fraud management in digital businesses is about building intelligent systems that can adapt to evolving threats in real time. This approach enables businesses to spot suspicious activity early, reduce exposure to risk, and take targeted action without disrupting the experience for legitimate users.
Key benefits of online fraud management:
- Protects revenue from unauthorized losses
- Helps detect suspicious patterns before damage is done
- Safeguards customer trust and brand reputation
- Ensures platform integrity and genuine user engagement
- Maintains compliance with data protection and financial regulations
- Saves operational costs caused by manual reviews
- Supports sustainable business growth without risk exposure
- Strengthens investor and stakeholder confidence
How to Implement a Fraud Management Strategy
Digital businesses have two primary options for implementing fraud prevention and detection:
1. Build Your Own Fraud Management Solution
- Establish Clear Fraud Policies and Procedures: Draft clear fraud policies and set expectations with internal teams and users.
- Educate & Train Employees: Build a dedicated fraud team that evolves with emerging threat trends.
- Set Access Controls and Data Governance: Define access levels for data and assign responsibility across employees for fraud prevention, detection, and correction, ensuring only authorized personnel can act on sensitive fraud-related information.
- Use Advanced Detection Technologies: Integrate advanced technologies like machine learning, AI, and device fingerprinting to ensure every suspicious or illicit activity on the platform is identified and flagged in real time.
- Build a Strong Response and Remediation Plan: Establish immediate response actions for detected fraud, such as locking out users or devices, activating priority tickets for fraud teams, and updating security layers to prevent future occurrences.
- Continuously Monitor and Improve the System: Monitor fraud trends within and beyond your industry, and continuously refine your fraud risk management system using new tools, real-time updates, and advanced security measures.
Pros: You understand your business best and the major threats it faces, allowing you to build a fraud monitoring solution tailored specifically to your business needs.
Cons: Building your own fraud detection system is tedious and time-consuming. It requires businesses to use a significant amount of resources, and may not guarantee accuracy against the latest evolving threats.
2. Use a Fraud Management Service
This approach involves buying fraud management software as a service and integrating it within your business. Here’s how to implement:
1. Identify business needs: Define the need for having a fraud detection solution by outlining specific threats like fake signups, transaction fraud, or bonus abuse.
2. Explore vendor solutions: Explore demos, explainer videos, and user guides from multiple vendors to narrow down the ones that align closely with your specific use cases and operational needs.
3. Run a POC (Proof of Concept) or trial: This step involves 3 parts:
- Integration: Install the plug-and-play solutions in your business platform
- Configuration: Adjust the risk threshold based on your business needs
- Testing: Test the live functionality and check the effectiveness of the solution
4. Automate Response Mechanism: Predefine immediate actions that will trigger automatically when fraud is detected, such as blocking a device or alerting teams, based on behavior patterns you’ve marked as risky.
Pros: An external fraud detection solution relieves businesses of the hassle of building and maintaining systems, allowing more focus on growth instead of handling patches and backend complexities.
Cons: Some third-party fraud solutions may offer low flexibility for customisation and lesser control over defining or adjusting risk thresholds, leading to more false positives that disrupt the balance between user experience and platform security.
Discreet Fraud Detection = Better User Experience
Balancing fraud detection and user experience is essential. Heavy-handed methods, like frequent pop-up verifications, can alienate real users. According to a GBG survey, over 97% of fraud management professionals believe poor UX is a side effect of aggressive fraud detection.
The solution? Use discreet, behind-the-scenes fraud management tools that work behind the scenes to detect fraud without disrupting user journeys.
The Best Fraud Management Tool for Digital Businesses
SHIELD is on its mission to eliminate fraud from the digital world by helping digital businesses worldwide eliminate fake accounts and stop all fraudulent activities. What sets SHIELD apart is its ability to stop fraud at the root with unmatched accuracy. With fast integration, minimal engineering effort, 20+ configurable risk signals, and zero reliance on PII, SHIELD delivers powerful, privacy-secure fraud prevention built for scale.
SHIELD’s Key Features:
- Persistent SHIELD Device IDs to expose potential fraudulent devices
- Adaptive AI & ML algorithms that evolves with emerging threats
- 20+ configurable risk thresholds across app & web
- Intuitive trust scores
- Frictionless authentication
- Fraud intelligence without reliance on PII data
- Global intelligence network
- Plug & play Android and iOS SDKs or JavaScript
- And much more.
Fraud Management Is a Strategic Priority
Effective fraud management is the backbone of survival and growth in the digital space. It’s crucial for businesses to make the right choice. Businesses must regularly reassess their fraud strategies and invest in effective fraud prevention solutions to avoid significant financial and reputational losses in the future.
Want to see SHIELD in action?
👉 Explore our case study on how SHIELD helped inDrive stop fraud syndicates
