Data Sharing Bureaus - Fraud Library

The Fraud Practice eCommerce Fraud Consulting Services

Data sharing bureaus are organizations that collect and aggreagate information from mulitple companies to improve fraud detection thru breadth of data.

Enter your search terms Submit search form

Web www.fraudpractice.com

Strength in numbers ...

Data sharing bureaus are organizations that collect and aggreagate information from mulitple companies to improve fraud detection thru breadth of data. These services aggregate informaiton across merchants allowing them to create, detect and inform any one merchant about potential fraudulent information before they could detect it themselves.

Data sharing bureaus can operate in one of two roles, a trusted source for identity authentication, like a credit bureau, and/or as a fraud service.

How Good Is It? 

Nobody in this business is ever going to say that sharing information isn't a good concept and could help prevent fraud. The problem isn't the concept, it is how do you get companies to share their data? This is a critical component to determining how effective a service provider is, since the service will only provide value if the vendor is able to get enough companies to participate.

Achieving critical mass is not a small problem to overcome as there are a number of barriers the vendors have to overcome to get a company to agree to share their data; and for the vendor to make it of value to the other participants.

In short the value of data sharing bureaus is their ability to build models based on a much larger data set than any one merchant has. A single merchants' internal fraud scoring system will only have limited effectiveness, as the breadth of data that is being looked at is only their data. This will affect any and all velocity checks such as velocity of change and velocity of use. For example, modeling and neural nets that are built, and/or used, solely in a one-merchant implementation don’t get the benefit of seeing consumer activity outside of their business. For data sharing bureaus the more data that goes into building the service, the better it will predict and catch fraud.

It is important to know that:

• Modeling and neural nets that are maintained in-house suffer from breadth of data, missing key information from attempts on cross-merchant data.
• It is only a tool: It provides good information, but merchants will still have to perform other fraud checks.
• Verify the vendor's validation of negative information; in some cases some participating companies could purposely flag their best clients to prevent competitors from doing business with them.

Considerations When Implementing or Buying This Functionality    

• How many companies are participating?
• What information is shared, and how is it standardized?
• How often is information provided by the companies?
• How is the data secured?
• Are the other companies in the same vertical markets as you?
• Is the service sharing good and negative experiences?
• How are the negative experiences validated?

Estimated Costs – Costs will vary based on the vendor you select. Typically this service is offered on a subscription pricing plan, but some offer it on a transactional basis. As with most services volume and the length of your agreement can greatly effect your cost.

Alternative Solutions – Use of fraud scoring, identity authentication.

Vendors –Ethoca, IdAnalytics, Early Warning Services, Merchant Risk Council (MRC).

How Does it Work?  

Vendors collect information either in a real time or batch mode from the participating merchants. The vendor cleans the data and updates their core data sets. The merchants call the vendor when they are processing a transaction to get a real time check on data asscoiated with a consumer.

The merchants also have to periodically notify the vendor when they get information indicating a past transaction has gone bad. The vendor updates the core data set with the negative information, so all participating merchants can make use of it.

How Do I Use the Results? 

The results from this type of a service should be used to augment your fraud prevention strategy. Getting a negative hit with this type of service is a strong indicator, but a "no hit" or "high velocity hit " are not necessarily strong indicators of fraud.

Building This In-House 

Any company can setup their own data sharing relationships with other companies.

Property of The Fraud Practice, all rights reserved, no unauthorized duplication, reproduction or distribution without the express written permission of The Fraud Practice.