IP blocking to mitigate merchant risk

IP Blocking Overview

IP Blocking allows you to block individual IP addresses or a range of addresses. If you have this feature, you’ll generally see it in your admin under Risk or Fraud Prevention Tools. Otherwise you may need to purchase a 3rd party antifraud package. Choices will vary depending on the software and platform you are using. Generally your merchant gateway will have adequate tools available to you.

Look at the IP address for your suspect orders, and then do a DNS lookup. Merchants can then use the information to decide whether to add the IP address to the IP Block list.  While blocking an IP range can save time when you wish to block a network associated with a high-risk country or organization,  there is also a greater potential for blocking legitimate buyers if you make a mistake.

  • IP Blocking should be used as a tool to help minimize carding—the scripting of orders through a merchant store typically to validate credit card information.
  • IP addresses can be spoofed whereby fraudsters go through an anonymous proxy or falsify their IP address so blocking an IP may not block that particular fraudster.
  • IP addresses can be assigned dynamically so blocking a fraudulent order from one person may in turn block other possibly legitimate orders in the future for buyers assigned that particular IP address.

Merchants must use their judgment and business experience in using IP Blocking to balance the risks of fraudulent orders (cost of goods, cost of chargebacks, other fees) against the risk of potentially lost legitimate orders.

In addition to the problem caused by dynamic IP addresses, merchants should also exercise caution in blocking IP addresses for the following reasons:

  • Certain networks such as company networks, may group outbound requests into only a few IP addresses. If you block an IP address based on an order from one possible fraudster on such a network, you may block legitimate buyers on the same network.
  • Orders may originate from shared computers such as those found in libraries or Internet cafes. If you block an IP address based on a potentially fraudulent order placed by a fraudster, you would then be blocking any potential future orders from legitimate buyers using computers with the same IP address.

Here is a site to quickly generate IP addresses to block IP addresses by country for free www.blockacountry.com.

Note: I make no warranty as to the realiability of the link above.