26.01.2023 Universepay

Blacklisting and Whitelisting as Fraud Management Methods in Payments

Fraud management is a critical aspect of the payment industry, as it ensures the safety and security of both consumers and businesses. The rise of e-commerce and digital payments has led to an increase in fraudulent activities such as account takeovers, payment fraud, and identity theft. Statista.com estimates that in 2022, e-commerce merchants lost $41 billion worldwide from online payment fraud. This value exceeds the figures for 2021 by 2 times. According to Juniper Research, cumulative merchant losses from fraudulent activities are projected to exceed $206 billion between 2021 and 2025. Thus, to protect against such threats, companies often employ blacklisting and whitelisting techniques. Read our comprehensive guide to blacklisting and whitelisting as fraud management methods in payments to ensure your financial transactions’ security.

What Are Blacklisting and Whitelisting?

Blacklisting is a tool used in the payment industry to prevent fraudulent activity. It involves creating a list of known deceitful entities or individuals and denying them access to payment services.

Whitelisting, on the other hand, involves creating a list of trusted entities or individuals and only allowing access to payment services for them.

Blacklisting and whitelisting can be effective in reducing fraud, but they can also lead to false declines of legitimate transactions if not implemented correctly.

How Can Blacklisting and Whitelisting Identify Suspicious Activity?

Blacklisting and whitelisting can both be used to identify suspicious activity in different ways. Further, in our article about blacklisting and whitelisting as fraud management methods in payments, we will explain how these methods function.


By keeping a list of known fraudulent actors or transactions, the system can flag any new activities that match the characteristics of those on the list. For example, if a particular credit card number was associated with fraud in the past, any future transactions with that credit card number will be automatically rejected.

Additionally, IP addresses, emails, phone numbers, and other identifying information can also be blacklisted if they are known to be associated with fraudulent activity.


By only allowing members or transactions that are on a pre-approved list, the system can flag any new activities that are not on that list as suspicious. For example, if only certain IP addresses are allowed to access a particular system, any new IP addresses that attempt to access the system will be transmitted as suspicious. The same goes for credit card numbers and their types, phone numbers, classes of devices, etc.

Besides, companies can create a whitelist of categories of transactions that are considered less susceptible to fraud, for example, payments above a certain amount. Any transactions that fall outside these parameters will be marked as false.

The Pros and Cons of Using Blacklisting and Whitelisting as Fraud Management Methods in Payments

Despite being, effective fraud detection methods, both blacklisting and whitelisting have their own advantages and disadvantages.

Advantages of blacklisting:

  • It is a very effective way to detect fraudulent transactions if you already have malicious card or device information. In this case you will ensure blocking known intruders.
  • Moreover, it is relatively easy to implement and maintain blacklists because just a nomenclature of options to block is required.
  • Disadvantages of blacklisting:

  • Keeping the list relevant takes a lot of time, and the data may not be up-to-date, as new fraudulent transactions may not be added immediately. To meet the highest level of security, the list has to be constantly updated with new threats.
  • Furthermore, blacklisting can lead to false positives, as legitimate participants or transactions can be erroneously added to the list.
  • Advantages of whitelisting:

  • It effectively identifies approved subjects or transactions, as only those that are on the list will be allowed.
  • Also, the whitelist is important for companies in terms of saving time and resources. If a client has proven his reliability, then there is no need to repeatedly check him through the filters. It is not necessary to apply the same security measures to him every time. This is especially favorable for small online stores that verify transactions manually or use inexpensive anti-fraud systems with limited capabilities.
  • Besides, whitelists can help prevent false positives because only parameters or transactions from the list will be proceeded.
  • In addition, whitelisted clients themselves also benefit. Their transaction will be processed faster because it will not be verified, and the risk of rejection is much lower.
  • Disadvantages of whitelisting:

  • It can be difficult to maintain the system because the list must be always kept up-to-date. This requires a lot of specific information about each transaction, client, and card, as well as constant analysis of this information.
  • Whitelisting can also lead to false negative results. Even with a whitelist in place, scammers can get past it if they manage to spoof a trusted address or device.
  • How can blacklisting and whitelisting as fraud management methods in payments be combined?

    Blacklisting specific credit card numbers, IP addresses, emails, phone numbers, and types of devices while whitelisting certain types of those parameters can be a great strategy. For example, businesses can create a blacklist of credit card numbers that have been associated with fraud in the past while also creating a whitelist of credit card types that are considered less susceptible to fraud. This can assist in preventing suspicious transactions while also allowing legitimate ones to go through.

    In conclusion, companies can create a multi-layered strategy by uniting blacklisting and whitelisting as fraud management methods in payments. However, it’s important to keep in mind that they should be integrated with other fraud detection techniques such as machine learning and behavioral analysis for a more comprehensive solution.

    UniversePAY offers its merchants the opportunity to use blacklists and whitelists. Your business is maximally protected from risky operations due to our anti-fraud system. Start your cooperation with UniversePAY now by filling out the form below or emailing us at info@universepay.eu