4 Ways to Bring Value to your Fraud Team & Improve Fraud Management

Profits are slim in eCommerce. Specialty, department, and discount stores see a 6% to 10% operating margin, whereas Amazon and similarly-structured companies operate with an average 1.3% margin*. The only way to improve margins is to raise prices or cut costs (or a combination of both). Since raising prices turns away customers, most retailers choose to cut costs.

A relatively unnoticed way to operate more efficiently, and thereby reduce unnecessary spending, is to focus on fraud management. Today, fraud management accounts for less than 1% of digital commerce revenue spend. That’s pretty disappointing, considering the responsibility of managing lost CNP revenue contributes directly to operating margins. For fraud managers, resources are limited, making it tough to maximize success. Since fraud management isn’t a revenue generating activity, it often seems as though these efforts are less valued than other obvious revenue generating departments. Take charge of fraud management with these 4 tips to prove the value of your efforts and make fraud prevention a valued asset in your company.

Know your KPIs

According to the CyberSource Fraud Benchmark Study, 62% of merchants believe that their chargeback rate is their most important KPI**.  If reducing chargeback rates is your biggest focus, take a step back and look at the bigger picture.


Do you know how many orders you are manually reviewing that end up accepted with no chargebacks?  Merchants find that they end up accepting 89% of all orders sent into manual review**. There is a huge opportunity here to increase your auto-accept rate, which in turn fulfills orders faster, provides a better customer experience, and reduces the total manual review cost. Tracking your auto-accept rate is easy. But there are other metrics you can track as well, including number of transactions that are fulfilled within a certain time period. If you can provide an increase, that is valuable.

False positive/customer insult

You could theoretically catch all of your chargebacks, but not without the detrimental effect of rejecting good customers. Do you know your false positive/customer insult rate?  Do you even know where to begin to figure it out?  Merchants believe that up to 10% of their rejected orders were actually good customers**. Identifying what is causing you to reject good customers is an immediate way to increase revenue.

If your team had less good orders to review, they may have more time to call the rejected orders and find out what would have been a good transaction. Maybe they have time to save the order. If not, they can either whitelist that customer or help you reevaluate what caused those good customers to be rejected. Presenting a reduction in lost revenue to your leadership will show you are focused on the bigger picture.

Optimize your ruleset

Many of us get caught in a reactive cycle. We often feel like the fraudsters are always 5 steps ahead of us. And we don’t figure it out until they have moved onto a new way around your rules. And in some ways, this is true.
That’s what you should always be evaluating the performance of your ruleset and preparing for the risks ahead. Is your company adding more digital SKUs?  Is marketing launching a 20% off electronics promotion?  Is there a new affiliate driving sales?  You need to be aware of these things before they happen so you can prepare.

The main goal of your company is to increase revenue. Your job is to make sure those sales are, in fact, good revenue. What kind of positive rules can you write to identify your good customers and get them out of your review queue?  Imagine being able identify positive signals such as a match between the customer name and the subscriber of the phone number they provided, that the email was seen over 2 years ago, and that the IP address is under 10 miles from both the phone and the shipping address. Identity Check provides these match statuses and risk signals in one API call, enabling you to auto-accept those good customers.

Minimize use of free tools

Here are two things to consider when choosing your tools:

  • How much is your analysts’ time worth?
  • How much revenue is lost from their inability to make a good decision with their current tools (or lack thereof)?

How much time does your manual review team spend searching 4-5 different free tools just to make a decision?  And how confident are they with their decision?  Would one or two paid tools with good service allow your team to make faster and better decisions?  The answer is always yes.
Good management is empowering your team to get their job done with the best resources. Don’t shy away from paid tools, just because similar information is free on the internet. Nothing is truly free – it will cost you either in time or lost revenue – or both!

Never stop calculating your ROI

Did you thwart an attack on your business with your current tools?  Calculate what that loss would have been if you didn’t have your current tools in place. Present that to your executive team so they can see how much money you are saving in fraud loss. Don’t be shy and don’t wait for them to ask. They won’t know the value of what you are doing if you don’t tell them. And they may not understand why you are asking for an increase in budget for more tools if you aren’t proving your value to begin with.

*Source: Online Shopping Isn’t as Profitable as You Think; HBR
*Source: CyberSource 2017 Online Fraud Benchmark Report – North America

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