Reduce Transaction Fraud using Marqeta’s Dynamic Spend Controls

by Rahul Deshmukh, Sr. Director Product Marketing

In the last couple of blog posts, I provided an overview of Marqeta, some of the key platform features and how Marqeta helps manage card programs. To quickly recap, Marqeta is a program manager for card programs and an issuer processor with an open API that includes rich features like Just-In-Time “JIT” funding, tokenization, and deep flexibility, enabling real-time management of nearly all aspects of card programs. Fundamentally this means that Marqeta enables the creation of cards and also processes payments when these cards are used at merchants. Developers use Marqeta’s open API to embed business logic and rules that control when and how the transaction may occur. In this blog post, I am going to focus on one of the many innovations at Marqeta — spend controls.

There are situations where you want to limit the spend on a card or use of a card for a specific purpose. Historically, these controls have been static with pre-defined and limited rules. Innovative businesses need the flexibility to take action on what transactions to approve or deny on a variety of parameters.

Spend controls place limits on how users conduct transactions. They can limit the amount for each transaction, the frequency of transactions, and with whom transactions are conducted. You can configure a spend control to limit either a single user or all users associated with a particular card product. You can control a user’s spending based on:

Where the user spends (individual merchants or merchant categories).

How much the user spends (transaction amount and frequency of spending in a given time period).

Amount or frequency at a specific merchant or category of merchants.

Spend controls are of two types — authorization controls and velocity controls. An authorization control limits the choice of vendors with whom a user can or cannot conduct a transaction. A velocity control limits the maximum amount and the frequency of transactions. By combining authorization and velocity controls, you can grant access to a vendor but, at the same time, limit transaction values. A velocity control for a card product could, for example, limit spending to $100 per day applies individually to each user that has a card associated with that card product. That is, each user can spend up to $100 per day.

The Marqeta platform enables you to create controls that apply to an individual user or to a set of users who have cards associated with a specific card product. Marqeta may create additional program-level controls, which apply to all users. Multiple controls can be applied at each level to control how, when, and where your users spend with their cards. The most restrictive controls always takes precedence if there are multiple controls in place overriding controls exist at different hierarchical levels. You could also use card product-level controls to apply a collection of cards sharing the same properties. They apply to all users with cards belonging to that card product or use user-level controls that apply to a single user — the cardholder.

Finally, let’s explore an example use case:

On-Demand Delivery:

On-demand delivery companies accept orders from consumers and then dispense a courier to purchase and deliver the item. Cards are the most efficient and widely accepted payment method. On-Demand delivery companies rely on couriers who are constantly on the go — neither can afford to experience issues at checkout. With typical purchasing cards, controls are limited and fraud is often detected after the fact. With Marqeta’s Open API and Gateway JIT Funding, on-demand delivery companies can optimize their working capital by funding cards in real-time. Dynamic spend controls empower on-demand delivery companies to significantly mitigate fraud by implementing their own validations at transaction time, including things like whether the courier is on shift, whether they’re at the proper merchant, and whether the amount is correct.

I hope this overview was helpful in understanding Marqeta’s dynamic spend controls. For a more detailed read, use the API Reference Docs.