Velocity Checks

Velocity checks are a fraud prevention technique used to monitor the frequency of transactions within a specific timeframe. By analyzing transaction data for unusual patterns in volume or speed, velocity checks can help identify potentially suspicious activities, including:

• Automated Attacks: A sudden surge in login attempts or transactions from a single source could signal an automated attack by bots or malware.
• Money Laundering: Criminals might attempt to launder money through multiple, smaller transactions to avoid detection. Velocity checks can flag such patterns.
• Account Takeover (ATO): If a hacker gains access to a user's account, they might try to make a series of rapid transactions to steal funds. Velocity checks can detect this unusual activity.

How Do Velocity Checks Work?

Velocity checks typically involve these steps:

1. Defining Parameters: Businesses establish thresholds or limits for transaction frequency based on factors like historical user behavior, average transaction value, and industry standards.
2. Real-Time Monitoring: Transaction data is monitored in real-time to identify instances where transaction frequency exceeds predefined thresholds within a specific timeframe (e.g., number of login attempts per minute, number of purchases per hour).
3. Risk Assessment: When a transaction exceeds the velocity check limits, the system triggers a risk assessment. This might involve additional verification steps or temporarily suspending the account until reviewed.

Benefits of Velocity Checks

• Enhanced Fraud Detection: By identifying unusual transaction patterns, velocity checks can help catch fraudulent activity in progress, potentially saving businesses and users from financial losses.
• Improved Security Measures: Velocity checks can be combined with other security measures like two-factor authentication (2FA) to create a multi-layered defense against fraud.
• Streamlined User Experience: For legitimate transactions, velocity checks operate in the background and do not typically disrupt the user experience.

Real-World Examples of Velocity Checks

• E-commerce Platforms: Online stores might use velocity checks to limit the number of purchase attempts from a single IP address within a short period to prevent automated bots from buying up limited-edition products.
• Financial Institutions: Banks may set velocity limits on ATM withdrawals or money transfers to prevent unauthorized access or money laundering attempts.
• Login Attempts: Websites and online services can use velocity checks to limit login attempts and prevent brute-force attacks where hackers try to guess user passwords.

Smile ID and Velocity Checks

While Smile ID focuses on providing robust identity verification solutions, our services complement the security measures employed by businesses, such as velocity checks. Our solutions enhance overall security by ensuring that only legitimate users gain access to systems and services, reducing the need for overly strict velocity checks for legitimate transactions.

Conclusion

Velocity checks are a valuable tool for businesses of all sizes to combat fraud and protect their financial interests. By monitoring transaction frequency and identifying unusual patterns, velocity checks can help deter fraudulent activity and maintain a secure financial environment. Smile ID contributes to a safer online environment by providing identity verification solutions that strengthen overall security postures. Staying vigilant and continuously adapting fraud prevention strategies are crucial for effectively combating evolving criminal tactics.