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Fraud Detection vs. Fraud Prevention: How LOQR Avoids Fraud Before It Happens

Author LOQR
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Fraud in the digital world is becoming increasingly sophisticated. When talking about fighting fraud, the terms fraud detection and fraud prevention often get used alternatively. But while both are essential, they serve different purposes.
At LOQR, we believe that simply detecting fraud is no longer enough. That’s why our digital identity Platform emphasises prevention, using Strong Customer Authentication (SCA) to ensure that risky behavior is not only identified but also prevented before it can occur.

Fraud Detection: Reacting to the Risk of Fraud

Fraud detection systems are designed to identify suspicious activity either after it has happened or while it is happening. This usually involves monitoring logs to detect unusual geolocation or device behaviour, analysing behavioural patterns such as flagging transactions that don’t match a user’s typical profile, and using rules or machine learning models to detect irregularities.

The Problem with Detection-Only Systems:

Detection alone is reactive. It might prevent fraud from happening, but by the time it triggers an alert or action:

The process has already started.
Data may already be exposed.
The user journey is interrupted with dead ends or setbacks.

Even if a fraudulent process is halted, the system may need to go back and “undo” or “block” the action, which can be a time-consuming experience that affects customer trust.

Fraud Prevention: Avoiding the Risk of Fraud

Prevention, on the other hand, aims to ensure that fraud doesn’t happen. Instead of watching for signs of fraud during the process, prevention technologies build trust from the start.

This is where Strong Customer Authentication (SCA) becomes essential.

Strong Customer Authentication is a requirement under the European PSD2 regulation. It requires using at least two or three authentication elements before accessing an application or service.
By using SCA, you not only confirm a user’s identity, but also protect their identity with layered, cryptographic checks that fraudsters find hard to bypass.

How LOQR Prevents Fraud

At LOQR, we embed SCA directly into the core of every digital identity process. This means that authentication is not only a security feature but also a defense mechanism against fraud.

To put the value of fraud prevention into perspective, consider this example: if the average fraud loss per case is €15,000, and an organisation faces around 200 fraud cases per year, the total potential loss amounts to €3,000,000 annually. By implementing LOQR’s Strong Customer Authentication and preventive identity orchestration, this risk can be significantly reduced. For instance, if LOQR helps reduce fraud by 80%, that equates to direct savings of €2,400,000 every yeara compelling return on investment that goes beyond security and directly protects the whole identity process.

Key Benefits of LOQR’s Preventive Approach:

No Suspicious Log to Flag
Unlike detection systems that analyse behaviour during the process, LOQR ensures that unauthenticated or suspicious users never reach the process stage. If the SCA fails, the process does not even start.

Seamless and Secure Customer Journeys
LOQR’s Platform verifies users invisibly, making it nearly impossible for fraudsters to impersonate genuine customers. There’s no need to disrupt the user experience with post-processing interventions or alerts.

End-to-End Identity Protection
Our Platform not only authenticates but also manages digital identity throughout the entire lifecycle, from onboarding to authentication and recovery.

Fraud is evolving, and our defence mechanisms must keep up. At LOQR, we don’t wait to detect fraud after it occurs; we prevent it from entering the system, protecting both businesses and users. 

 

Talk to an expert and learn how you can build trust from the very first step.