Free Vs Paid IP Geolocation APIs: Which Is Right For Your Fintech Security Stack?

IP geolocation API is an essential tool for fraud detection that combines databases, algorithms, and geolocation technologies to gather information about the geographical location associated with an IP address. It is essential for fraud detection, enhancing customer experience through personalised services, and ensuring regulatory compliance. This tool is available in two forms: the paid IP geolocation API and the free IP geolocation API. Both are effective for fraud detection, but typically, the benefits of the paid IP geolocation API outweigh those of the free IP geolocation API, as it features fewer limits and reduced errors.

In this article, you will learn more about each API, and the decision on which is best for your business is made easy.

What Does an IP Geolocation API Actually Do?

IP Geolocation API is a tool that uses IP addresses to determine the geographical location of a device. It does this by combining several databases, algorithms, and geolocation technologies that map IP addresses to the approximate location of users. The information provided by this API includes country, region, city, latitude/longitude, and the associated ISP (Internet Service Provider) or ASN.

Key use cases

Login Validation

Login validation is done through IP geolocation API using the IP address of users to verify their location against a set of predefined data. Whenever a login is initiated, it verifies the location to ensure it matches the normal location of the user, and if it doesn't, it requests additional verification.

Transaction Risk Scoring

Transaction risk scoring by IP geolocation API analyses transactions by comparing them with the historical patterns and the geographical data of the users. Whenever an anomaly is detected, risk scores are attached, and such transactions are flagged, but when the risk score is high, the transaction is declined automatically.

Fraud Monitoring

Cybercriminals constantly use VPNs/proxy servers to keep their location hidden and conduct fraudulent transactions. To effectively identify and prevent such activities, businesses need to continuously monitor transactions and flag unusual activities.

Free IP Geolocation APIs: The Tradeoffs

Limited Data Accuracy, Especially in VPN/Proxy Scenarios

The accuracy of free IP geolocation API is affected by many factors, like VPNs (Virtual Private Networks), proxy servers, and the use of mobile data that can hide or change the geographical location of users. Also, in cases of dynamic IP addressing where the IP addresses of users are regularly altered by the ISPs, the location of users cannot be determined accurately most of the time. To combat this issue, the IP location API for fraud prevention needs to be regularly updated according to evolving technologies.

Low Request Limits

The number of API calls you can make per second is limited. For example, some may take only 100. This reduces the efficiency as errors may result when it exceeds the limit, and increases the time spent on transactions due to delays. To eliminate this issue, the API needs to be constantly monitored to avoid exceeding the limit or alternatively, upgrading to a higher plan, which can function properly with higher requests.

Lack of Support

Free IP geolocation APIs might require help or support from the relevant teams to resolve some issues, like troubleshooting or setting up the system to function properly. In cases where they are unavailable, businesses face security vulnerabilities.

The Case for Paid IP Geolocation APIs

Essential For KYC/AML

IP geolocation APIs are useful for Know Your Customer (KYC) and Anti-Money Laundering (AML) as they use comprehensive databases to do the following

Augment Customer Identity Verification

Paid IP geolocation APIs compare the IP address of customers with their geographic location and enable businesses to validate the authenticity of the details provided by customers in order to avoid identity fraud.

Prevent Fraudulent Activities

With this tool, transactions are continuously monitored, and whenever it is observed that the IP address location of the user does not match their normal location, it is flagged as a fraudulent transaction for further verification.

Transaction Monitoring and Validation

By continuously monitoring IP addresses linked to transactions, AML systems can identify patterns of suspicious activity. For example, there are some countries that have been blacklisted for fraudulent activities, and when such is observed, additional verification would be requested.

Compliance

Every country has specific regulations guiding financial activities, and with IP geolocation, businesses can ensure compliance by identifying the location of users and restricting access to certain services.

Integration With Fraud Signals

Paid IP geolocation APIs are more effective as they feature other fraud detection tools like ASN, IP reputation, Proxy/VPN detection, Payment Fraud Analysis, and others. When these tools combine, most fraud tactics are exposed as they significantly improve detection coverage and reduce blind spots. However, with free IP geolocation, which offers limited services, some fraudulent activities are not detected, and the business is still open to attacks.

Internal Greip tests show paid APIs typically return location data with 90–98% accuracy versus 60–70% for free APIs in high-risk IP blocks.

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Why Greip's IP Intelligence API Strikes the Best Balance

1. Offers Location, ASN, Proxy/VPN flags, and IP Risk Scoring in one API

Greip is an all-in-one fraud detection tool that uses AI and Machine Learning algorithms to detect fraud. A fraud detection tool that only carries out IP geolocation would be ineffective in fraud detection, as it cannot detect the use of VPN/proxy. However, with Greip, you get to enjoy an IP geolocation API along with other services, including ASN Lookup, Proxy/VPN detector, and Fraud risk scoring.

The IP geolocation data makes it possible for businesses to identify the geographical location of users, the ASN Lookup helps identify the network provider linked to the IP address, the Proxy/VPN tool identifies the use of VPN/proxy to mask or change user location, IP risk scoring identifies the level of risk connected to an IP address and attaches scores to it based on such observations. IPs with high-risk scores are rejected.

2. Transparent, Scalable Pricing Built for Startups and Growing Fintechs

Greip's pricing is designed to accommodate Fintech companies. Startups are provided with a plan that they can grow with, while growing companies also have a plan designed to support growth, as it is tailored to suit their budget and plans. Greip's payment plans are as follows;

• Free tier: 15k calls/month, ideal for testing and low-volume use.
• Standard: 170k requests/month.
• Premium: 400k requests + payment fraud, IBAN/BIN validation, ASN lookup, scoring, multiple webhooks.
• Pay-as-you-go: Unlimited volume, advanced support, high scalability.

3. Simple Integration and Developer-friendly Documentation

Greip has a platform that can be easily implemented by developers into their applications within a shorter period and with fewer issues. Also, Greips' support team is always available to provide the required assistance.

Greip has gained recognition worldwide for its effectiveness, and presently, it is used by multiple digital payment startups across the US and UK to reduce onboarding fraud rates and chargebacks.

Use Cases Where Paid APIs Make a Difference

1. Flagging Mismatched IP/Billing Data During Payments

Paid APIs feature several tools which are effective for flagging mismatched IP/billing data during transactions. Which includes Real-time analysis, risk scoring, IP address mapping, Proxy/VPN detection, and geolocation comparison.

2. Blocking High-risk Sign-ups from Flagged Regions or IP Addresses

Some regions are well known for fraudulent activities and have been blacklisted. Whenever logins are observed from such locations, they are flagged immediately for further authentication before the transaction is verified.

3. Supporting Compliance Audits and Fraud Prevention KPIs

The ways by which IP geolocation APIs support compliance audits and fraud prevention KPIs include:

1. Geolocation Data

IP geolocation APIs provide businesses with the exact location of users, making it possible to monitor the activities of users to detect anomalies and ensure region-specific regulatory compliance.

2. Risk Assessment

Through IP geolocation analysis, businesses can perform a risk assessment to identify fraudulent activities and take the required measures to protect against such attacks.

3. Proxy and VPN Detection

Paid IP geolocation APIs can detect the use of VPN/proxy and flag such users. This is important in preventing access to their systems by cybercriminals through masked IP addresses.

Conclusion

Free APIs can be used for small transaction monitoring or trial, but in more complex cases, like in large e-commerce businesses, a more reliable and efficient API is needed. Paid APIs are designed to work with larger and more complex transactions within a shorter period, which helps reduce errors and time wastage, which are common with free APIs.

One of the most commonly used paid APIs is Greip's IP Location Intelligence tool, it is an affordable and developer-friendly IP intelligence with built-in fraud protection. Greip's IP Intelligence API offers the best of both worlds:

• A free tier for trying out features
• Scalable paid plans packed with precision, fraud risk data, and uptime guarantees

Ready to enhance your fintech stack? Start for free now or explore Greip's paid tiers to add real-time, developer-friendly fraud intelligence to your app.

FAQs

Is Geolocation The Same As IP Address?

IP addresses and geolocation are closely related, but they are not the same. An IP address provides a unique identification for devices connected to the internet, and geolocation determines the physical location of the device.

Does Geolocation API Require User Permission?

Yes, users are asked for their permissions through a prompt as the geolocation API needs their location to function properly.

Is IP Geolocation Reliable?

IP geolocation is very reliable at the country level, but for international transactions, you would need more complex tools. These other tools are provided by Greip, which is an all-in-one fraud detection tool.

References

Why Smart Businesses Use VPN/Proxy Detection

Is there a limit to the number of requests I can make via IP Geolocation API?

IP Address geolocation: How it works and its applications

Role of Geolocation data in Fraud Prevention