A risk score, in payments and financial crime compliance, is a number that summarizes how risky a transaction, customer, merchant or device is judged to be. It is produced by a model or a set of weighted rules that examines available data, and it is usually expressed on a scale such as 0 to 100 or 0 to 999, where a higher figure means greater risk.
For a card payment, the inputs include the amount, the merchant, the device, the location and the cardholder's past behavior, and the score is returned in milliseconds by real-time fraud scoring. The business then compares it with a risk threshold: low scores are approved, high scores declined and those in between sent for review or step-up authentication. In anti-money laundering work, a customer risk score built from factors such as country, occupation, product and ownership determines the level of due diligence under the risk-based approach.