Location Intelligence in Fraud Detection: How It Works Across Industries

Location intelligence plays a vital role in identifying and preventing fraud. A good fraud detection software like Bureau combines the power of location.

Author

Team Bureau

In today's digital landscape, protecting against fraud and managing risks is paramount for businesses across industries. Bureau, a fraud prevention company, offers cutting-edge solutions powered by location intelligence to address these challenges.

This blog explores the concept of location intelligence, its application in fraud detection, and the advanced features provided by Bureau to mitigate risks effectively.

What is location intelligence?

Location intelligence refers to the process of deriving actionable insights from geospatial data. It involves analyzing data from various sources, such as GPS coordinates, IP addresses, Wi-Fi access points, and mobile device locations, to understand patterns and trends related to specific locations.

This information is crucial for identifying regions with higher risks of fraudulent activities, preventing fraud in real-time, and ensuring compliance across different sectors.

There has been a rising demand for location intelligence from enterprises because of:

• the rise of the gig economy & quick commerce
• an increase in regulatory challenges like geofencing regulations in multiple industries.
• the need for a high-quality user experience
• growth of mobile transactions,

Location Intelligence: Use cases to navigate risks and detect fraud in different Industries

Location intelligence plays a vital role in identifying and preventing fraud. A good fraud detection software combines the power of location intelligence with an AI-driven risk engine to identify a genuine user's patterns and flag anomalies and deviations in real-time.

Gaming Industry:

In the gaming sector, location intelligence helps comply with regional gambling laws by ensuring players are within approved jurisdictions. It also prevents location-based fraud, such as using VPNs to bypass regional restrictions.

A simple example would be the ban of PubG, a popular multiplayer game, in India. This is a regional restriction, and any user residing in the country cannot access its services. If attempted, this is the message that is shown -

However, it can still be accessed via VPNs that mask IP locations. This is the loophole that many fraudsters employ, especially for real-money games, to manipulate game data and win rewards illegally.

Another example would be in 2017, the regional state governments of Sikkim, Assam, Telangana, Arunachal Pradesh, and Tamil Nadu decided to ban chance-based games in their states. This meant that these states' die-hard gamers and gamblers resorted to tactics like using VPNs that can bypass geo-fences.

2. Fintech and Financial Services:

For financial institutions, location intelligence is crucial in detecting fraudulent transactions and preventing account takeovers. It helps identify suspicious patterns, such as transactions from regions known for high fraud rates, and take proactive measures to protect customer accounts.

Passive location checks during different stages of a user’s journey, like login, updating account details, completing a transaction, etc. can provide continuous authentication. This improves the user’s customer experience while shielding them from malicious actors.

It can help insurance companies verify customer addresses and can help reduce the number of false positives. It can also help them speed up their claim processes, improve customer conversion rates, and minimize costs.

3. Compliance and Regulatory Adherence:

Businesses must adhere to various regional regulations. Location intelligence aids in ensuring compliance by tracking and restricting activities to approved areas, thereby avoiding legal repercussions and fines.

Key Features of Bureau's Location Intelligence Solution

1. Impossible Travel Detection:

Bureau leverages unique user IDs and geolocation data to detect impossible travel patterns. When a user's account is accessed from two geographically too distant locations to travel between in the given time, it raises a red flag for potential account takeover. This helps quickly identify and mitigate fraud attempts.

For example, if a person has logged into their eCommerce account from California at 11:15 pm, and the same account also shows login attempts from New York at midnight, it would be a case of ‘impossible travel’, increasing the likelihood of it being a fraud.

When impossible travel detection is coupled with other signals like detecting the presence of a screen share/phone call during payment transactions, Bureau has a 99% success rate of stopping a social engineering attempt at an account takeover!

2. Cluster Risk Score:

Cluster Risk Score is a metric to gain insights on the density of devices/users in the vicinity or close proximity of each other. This also helps identify the presence of device farms and other large-scale institutionalized fraud rings.

Bureau uses geo-hashes to cluster data points and assign a risk score to specific regions. This helps identify high-risk areas and focus fraud prevention efforts more effectively.

Cluster Risk Score is implemented with the help of “Geohashes”. Geohashing is a method of encoding latitude and longitude into a single string, allowing for efficient spatial data analysis. Geohashing can be done at multiple stages, ranging from a geohash encompassing a building to a geohash encompassing the entire country.

Bureau computes a cumulative density of users/devices for areas with different scales using hashes and device fingerprints.

Cluster risk doesn't directly correlate to any fraud use case. Still, it can help identify high-risk areas that show signs of systematic fraud or profiling a user base for a business.

3. Geo-fencing:

Geo-fencing involves creating virtual boundaries around specific geographic areas. This feature is particularly useful in sectors like gaming and fintech, where compliance with regional regulations is critical.

By setting up geo-fences, businesses can ensure that transactions and activities are only allowed within approved areas, reducing the risk of non-compliance and fraud.

4. Detection of Risky Locations:

Bureau continuously monitors and updates its database of risky locations based on historical data and emerging trends. This enables businesses to block or scrutinize transactions originating from high-risk areas, enhancing their overall security posture.