During Carl Tucker's talk at MRC Chicago in 2018, “Has Your Fraud Strategy Had a Makeover Lately,” he spoke with attendees about the latest ways to optimize their fraud prevention strategy.
A main highlight was about the merchant dilemma of mitigating risk while driving customer engagement. There is an obvious tension between the objectives of chief revenue officers and those of fraud managers. The important thing is that risk mitigation and customer engagement are not mutually exclusive; both can be managed successfully.
Here are a few issues faced by merchants and suggested solutions fraud managers can use to help solve them, which were discussed in Carl’s session.
Topic #1: When consumers buy online and pick up in store
- Short pick-up windows put pressure on manual review turnaround times
- When shipping addresses aren’t required, there is less data for verification
- The person placing the order might not be the same as the pick-up person
- Immediate return for store credit encourages monetization of stolen credentials
- Create separate analysis for omnichannel
- Minimize time spent on manual review
- Restrict high risk SKUs
- Validate the pick-up person
- Calculate velocities by the pickup location and look for inconsistencies
Topic #2: When customers make purchases on mobile
- Multiple devices used within a short time period can raise flags
- In-transit purchases can interfere with IP geolocation
- Peak time for mobile and PC is different
- Consumers are reluctant to provide a lot of data on small screens
- Create separate strategies for mobile orders
- Capture device type and operating system
- Set up detection tools such as geolocation detection, 3-D Secure, phone number verification or device fingerprinting
Topic #3: When customers pay with a card on file
- This can simplify checkout for frequent customers
- Allows merchants to accept cards on positive list
Solutions – it enables merchants to:
- Build customer profiles
- Track buying patterns
- Watch for account changes
- Conduct velocity checks around items
- Flag suspicious activity
Topic #4: Cross Border Sales
- Each country has its own local practices that can appear risky to untrained analysts
- Data availability differs by country
- Seek help from in-country experts
Topic #5: False Positives
- False positives remain a hidden problem, impacting millennials and high-income earners more than others. When you reject a legitimate order, you might:
- Lose a sale
- Lose a customer for life
- Send your customer to your competitor’s door
- Overwhelm your customer service center
- Risk negative word-of-mouth
As the nature of digital commerce changes, what appears to be fraudulent may in fact be legitimate and vice versa. Consider the phenomenon of false positives. False positives tend to skew towards millennials and high-income customers. Why? Millennials and younger customers are more likely to have different billing or shipping addresses or a large number of orders originating from a single address. High income customers are more likely to order high-value items, travel overseas, ship to hotels, ship gifts to different addresses, which fraud tools scrutinize closely.
- Know your decline rate
- Analyze decline reasons
- Review declines from manual review; examine tools and processes
- Analyze declines from authorization reason codes and look for spikes
In summary, it’s important to have a holistic, multi-phased approach to fraud management—one that begins by reducing the threat of fraud when the customer first establishes an account and continues all the way through the moment an online transaction is approved.
To learn more about solutions that can help you mitigate risk through effective fraud management, payment security and global and mobile commerce, check out our fraud solutions.