Payment processor taps Tippie Analytics Cooperative for help developing next gen fraud detection technology

Credit card fraud is big business. Estimates suggest that globally the problem tops $21-billion dollars a year. And it’s growing, especially for online and mobile ‘card not present’ transactions. Through a recent engagement with Paperless Transactions—an innovative payment processing vendor located outside of Dallas, Texas—the Tippie College of Business Analytics Cooperative is helping an industry leader stop this type of fraud in its tracks.

One aspect of the burgeoning credit card fraud problem that many find surprising is how—and why—charitable organizations are often the first to be victimized by credit card thieves and fraudsters. Because these organizations often lack the sophisticated fraud prevention technologies found in retail and other industries, fraudsters frequently attempt to validate stolen credit card information by making small online donations to non-profits. By doing so, criminals can learn an important—and valuable—piece of information: a successful transaction tells them that they possess valid credit card details. Once they know this, they are free to make much larger purchases, sell the information to other criminals, establish new lines of credit, or even use the details as part of much larger identity theft schemes.

“My gut was telling me we needed to invest, but you can’t write a seven-figure check based only on a gut feel."

Because of this, it’s important that non-profit organizations have the ability to quickly identify and stop credit card fraud perpetrated through their online giving portals. It’s a monumental problem, but thanks to Paperless Transactions, it’s not easy going for fraudsters…and it’s about to get decidedly more difficult. With its unique technologies and exclusive focus on the needs of non-profit clients, Paperless Transactions already puts a serious crimp in fraudulent donations through client websites. And they’d like to do even more. However, building next generation anti-fraud technologies requires a significant capital investment. “My gut was telling me we needed to invest,” says Micah Hobart, COO of Paperless Transactions. But you can’t write a seven-figure check based only on a gut feel.

Hobart had a hunch that he could mine his trove of historic credit card transactions to reveal clues that could be used to build an improved fraud detection system for nonprofit clients. If right, he could use these clues to build new technologies that could more accurately detect—and shut down—fraud in real time. 

He may have had the hunch, but the type of data-driven analysis he needed to validate it couldn’t be found just anywhere.

“In the industry we're in, it's really nearly impossible to hire somebody to do this type of work. That's why I reached out to the Tippie Analytics Cooperative at the University of Iowa.”

“In the industry we're in, it's really nearly impossible to hire somebody to do this type of work,” he said. “We really had to have somebody that enjoyed working with data and could do a thorough independent analysis. That's why I reached out to the Tippie Analytics Cooperative at the University of Iowa.”

To say that a lot was riding on the outcome of the project would be an understatement. Hobart puts it into perspective. “We simply can't make mistakes in this business. You have to make good sound decisions using large volumes of data. I knew that I could count on the Tippie Analytics Cooperative to put forth some students that could get the job done.”

The students in the Tippie Analytics Cooperative were certainly up to the challenge. After working with millions of data records provided by Paperless Transactions and doing some intensive data mining, they were able to reveal the important behavioral indicators of fraudulent activity that Hobart hoped were there.

"Tippie’s work is helping us build the next generation of fraud detection technologies that don’t even exist yet."

With the information he received and his hunch validated, Hobart finally had the assurance he needed to start investing in new product development. “Tippie’s work is helping us build the next generation of fraud detection technologies that don’t even exist yet.”

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