Manual Review - Fraud Library

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Manual review is a technique in which merchants use staff members to perform manual checks on orders to determine which orders are fraudulent.

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Not always a bad thing ...

Manual review is a technique in which merchants use staff members to perform manual checks on orders to determine which orders are fraudulent.

How Good Is It? 

In general, this is not a very good fraud-prevention technique. The quality and effectiveness of manual reviews is directly proportional to the knowledge and experience of the review staff, and the tools and process that they have established to perform manual reviews.

According to a merchant survey conducted by CyberSource Corporation in 2002, more than 50% of the merchants surveyed use some level of manual review and they were reviewing between 16% and 28% of the total number of orders they were processing. The survey also shows that the more sales the merchant did, the more likely they were to be using some sort of manual review.

This represents a big issue when it comes to scalability. If merchants are relying on manual review, what do they do when their business grows or when they have peaks? As a quick fix, or as a tool to look at for sales conversion, manual reviews are very effective. When it comes to fraud prevention, merchants need to be very careful how much they rely on them.

If merchants are going to rely on manual reviews, they need to use it to review the orders they were going to reject anyway. This allows merchants to have the possibility of converting an “insult” instead of trying to catch fraudulent orders.

Drawbacks of manual reviews include:

• It does not scale well, the only way to grow is to add new staff.

• The more people doing reviews the more unpredictable the results, as each will have varying levels of experience and will adopt their own styles for looking for fraud.

• There are good reasons to do manual reviews, but it should be done to catch those orders a merchant wants to try and keep instead of trying to find fraudulent orders.

• It typically lacks formal training of reviewers.

Considerations When Implementing or Buying This Functionality    

How many orders can their reviewers process?

• How much time will it add to their process?

• What percentage of fraud do they have to catch to make up the difference in their pay?

• How many customers will be falsely rejected by the process (insults)?

• What tools will be provided to the team to conduct the manual reviews?

Estimated Costs – Moderate to expensive

Alternative Solutions – Rules engine, fraud scoring, hot lists, warm lists, positive lists and consumer authentication

Vendors – Accertify, ,efunds,

How Does it Work?  

Merchantsset up a fraud-review team. Typically this team will work under the Call Center or the Finance Department. This team will be charged with reviewing all of the company’s orders to determine which ones are fraudulent. The team may have built sorts or queries that put the order data into views in which they can look for suspicious activity. They may look at activity by region, credit card number, or order size. In some cases they will have queues built to provide them with the orders that need to be reviewed.

When the team finds a suspect order, they may simply reject the order or they may do follow up to try and determine if the order is good. Some of the common tools used in conducting a manual review are:

• Call the bank and verify the shipping and billing information
• Use a lookup tool to check the consumer’s address and phone information
• Check historical purchase records to see if there is any other activity from this consumer in the past
• Call and verify the order data with the consumer
• Have the consumer fax or mail in copies of their driver’s license, a utility bill from the address, and/or credit card statement.

How Do I Use the Results? 

As a best practice, it is a very effective way to maximize sales to set up automated processes to weed out the orders a merchant would not automatically accept, and then use reviews on what is remaining. This also allows a merchant to scale better, since they are only reviewing orders they were going to reject anyway.

Building This In-House 

N/A

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