With the fraud tools, technology and knowledge now available, there is no longer any need for this trade off to exist. In fact, good fraud management should actively enable sales – supporting checkout conversion rates, customer loyalty and business growth. Expert analysts at ACI have extensive experience in doing exactly this with merchants around the world, with an approach based on the following principles…
Fine tune the engine
Merchants should select the fraud prevention technology and techniques that are best suited to their market segment, business, geography and customer base.
For example, is a process like 3D Secure an inconvenience for customers in the countries in which the merchant operates, or does it make them feel more secure? Do velocity rules accidentally create a raft of false positives, or act as a roadblock for a whole customer group if used without some additional signposts? Considerations like these are essential to ensure that a merchant’s fraud prevention setup does not negatively impact sales.
And a merchant does not just need to choose the right tools and processes; they also need to look critically at how they work together – how each individual cog, wire and piston in the fraud prevention engine is tuned and synchronized. Only then will a merchant start to find a performance level that drives an efficient and smooth running sales process.
And, because things – and people – change, it is important that fraud management tools and processes are not applied everywhere in the same way. Adaptive strategies need to be adjusted for temporary periods of acceleration, such as peak trading periods, shopping holidays, and promotions, as well as for longer term shifts in customer behavior and lane changes such as new market entries. This requires a level of flexibility for which a uniform “one size fits all” solution is not applicable. Consumer behavior continues to evolve, while fraudsters actively seek out new weaknesses to exploit – so merchant fraud strategies constantly need to evolve too, for different geographies, channels, and customer segments.
Share the spotlight
The real goal in finding the elusive balance between fraud prevention and high conversion rates is to identify and differentiate between fraudsters and genuine shoppers – blocking one group while enabling the other. This requires a fraud strategy that has equal focus on both groups simultaneously.
So, instead of simply mapping out fraud trends and using that information to stop only repetitive, established attacks, merchants should use customer data from their fraud solution to shine a light on what genuine customer behavior looks like in a proactive, real-time environment. The combination of rule strategies and adaptive analytics enables a continuously evolving fraud mitigation strategy.
Merchants should already be creating both blacklists and whitelists, and focus on what can be done to mitigate risk where transactions fall into a gray area. An additional best practice to be encouraged is running a ‘dress rehearsal’ for new fraud rules by first conducting them in silent, simulation mode, and making efficient use of manual review processes. Doing this can make all the difference to sales performance, and ensure the door isn’t closed on genuine customers.
Let the people perform
Expert fraud analysts play a vital role in the day-to-day running of fraud strategies. Almost every fraud management tool and process should be scripted, monitored and tuned by experts to get the optimal performance. Advanced analytics and machine learning are rapidly evolving technologies that make it possible to harvest insights for fraud strategies and monitor all transactions in real time; however, fraud analyst interpretation and analysis for fraud strategy development continues to be a fundamental need for any fraud operation.
A balanced approach remains necessary despite the ‘siren song’ of cutting-edge analytical solutions that fully displace fraud analysts. Analysts focus on keeping up to date with fraud and sector trends, so they understand how to adjust strategies to keep performance levels high and interpretation of fraud trends. Using experts to monitor both fraud prevention and sales conversion is the key to unlocking the high-powered performance that will keep customers returning – and leave fraudsters out in the cold.
For more advice on managing fraud and sales performance, download our new insight paper, ‘Driving Up Conversion with Effective Fraud Management’.