When attempting to detect and prevent payment fraud, e-commerce services may make two types of errors: false positives (type I errors), and false negatives (type II errors) [1]. In the following table, we describe each error type.

False positives

False positives, also called type I error, occur when a payment is suspected of fraud but it is not.

A client suspected of fraud could have his payment rejected or delayed in the case the merchant needs to verify the payment.

False negatives

False negatives, also called type II error, are errors that occur when a payment fraud remains undetected by the fraud prevention measures and materializes.

Chargebacks for fraud reasons are instances of type II errors.

Reference

  1. Wikipedia. Type i and type ii errors
  2. By Florent Darrault from Paris, France (Kendell Geers > T:error (2003) sans T) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)]