How to prevent Coupon Fraud in FraudLabs Pro

Coupons is one of the e-commerce promotions that are effectively used by the merchants to acquire new customers and maintain the business with the existing loyal customers. Success can be guaranteed if the promotions are widely referred and promoted. However, there is also a fraud risk if the coupon codes are given away freely without any control. It will be abused and cause the merchant to experience significant financial losses.

Coupon fraud happens when a fraudster takes the advantage of the coupon promotions and abuses the business promotion campaigns or coupon policy. Fraudsters might attempt to defraud a business by redeeming and using the coupon code multiple times. They may exploit the coupons and return policies to obtain money and other valuable items or services for free.

In order to prevent the coupon fraud, FraudLabs Pro has released the new validation rules to enable merchants to check and prevent it. The below validation rules are only applicable for Medium plan and above:

• Coupon Code Equals/Not Equals to the List Below
  This rule will check if the transaction is placed using or not using the specific coupon code. Merchants are allowed to add the list of coupon codes for validation checking.
• Total Coupon Used by Email within the last 24 Hours/7 Days greater/lesser than [Custom Value]
  This rule will use the email address of the transaction to check the total number of coupons used either within the last 24 hours or 7 days and whether the total number is greater or lesser than the merchant preset threshold.
• Total Coupon Used by IP Address within the last 24 Hours/7 Days greater/lesser than [Custom Value]
  This rule will use the IP address of the transaction to check the total number of coupons used either within the last 24 hours or 7 days and whether the total number is greater or lesser than the merchant preset threshold.
• Total Coupon Used in this Profile within the last 24 Hours/7 Days greater/lesser than [Custom Value]
  This rule will check the total number of coupons used in merchant profile either within the last 24 hours or 7 days and whether the total number is greater or lesser than the merchant preset threshold.

Below are the procedures on how to enable the Coupon Checking feature.

1. Login to the FraudLabs Pro merchant area and click on the Rules menu.
2. On the Rules page, click on the “Add Rule” button.
3. On the Rule dropdown, select “Coupon Code Equal to List Below”.
4. In the Value section, enter the coupon code. Please see the below screenshots for example.

5. Select the Action and then click on the “Save” button.
6. Done.

The above setting demonstrates how to flag an order with the specific coupon code for REVIEW. The mechanism of this checking is simple, it will check if the order is placed using the coupon code “m20pd”. If yes, the rule will be triggered and set the FraudLabs Pro status to the action (Manual Review, Approve or Reject) that is configured. If not, then the rule will not be triggered.

Conclusion, merchants need to be aware of coupon fraud as the coupled abuse of coupons might eventually affect the business profit margin and lessen the trust of investors. In the worst case, it might also damage the business brand and push away those high value customers.