Sarasota, FL, November 4, 2013 / By: David Montague, The Fraud Practice LLC.
It is that time of year again, the holidays are almost here, and merchants are finalizing their preparations for the holiday selling season. The holiday season not only brings increased traffic and sales volume, but also increased fraud attempts. Fraudsters know that organizations are often overwhelmed during the holiday rush and will try to get more fraudulent orders through during times of peak volume. For this reason, it is critical for merchants to have in place an effective fraud management strategy to catch fraud activity as early as possible. Of course it is a little late in the game to try and implement a new risk strategy at this point, but there are techniques available as software as a service (SAAS) you can put in place now to improve your capabilities in manual review.
I am often asked at this time of year “what else can I do to prepare my risk team for the holiday season?” In response to that question I typically encourage good core training for risk staff as well as setting up online accounts to perform three complimentary authentication techniques in manual reviews. I recommend authentication techniques because they can be put in place with no coding or integration, they can provide actionable data in a real time setting and they are easily understood by manual review risk personnel. I recommend implementing more than one technique, because you need to have an escalation path if one method isn’t able to authenticate a consumer; you want your review team to have a secondary option – and that option should not be the same technique with just another data source.
For many merchants, the manual review is the last line of defense to catch fraud, and the last opportunity to try and avoid turning away a good customer. Manual reviews during the holidays can be very problematic for a number of reasons, notwithstanding the most obvious of which, the impracticality for many merchants to conduct manual reviews on such a large volume of transactions in a short duration. Manual reviews during the holidays are also problematic because they rely heavily on “people” skills to make the right decision on the risk of a transaction and many e-commerce businesses hire seasonal help each year to keep up with the increased volume in November and December, and this help typically has less expertise in fraud detection. In terms of the physical act of conducting manual reviews, reviewing the transaction details and performing link analysis are still at the core of any manual review, but during the holidays there is a stronger need and reliance on being able to authenticate and verify a consumer’s identity.
To maximize your efficiency in converting good orders while catching fraud you should ensure you have good tools for performing authentication and verification in your manual review process. This doesn’t infer you need them on every review, but you want them for those transactions where you don’t have enough information to make a decision. Think about it, what tools do your review personal have available to them? How many different tools do they have? We would encourage you to have tools in place to perform authentication from different data sources to ensure you have maximum coverage. Three authentication techniques to consider are: reverse lookups, email authentication, and identity document verification.
As a best practice organizations stay away from making large scale changes to their risk management operations or strategy just before the holiday season, as merchants want to make sure the program and tools in place are working effectively. But the following tools and services are worthy of consideration, even with the holiday sales and fraud attempts soon to reach peak volume, as they can provide uplift both in terms of the number of transactions staff will be able to review and the quality of manual reviews.
One option is for an e-commerce merchant to setup access to an identity authentication vendor for performing reverse lookups on a manual basis. In a reverse lookup you input a data point such as an address, and the service will tell you about every identity it has associated with that data point. While many organizations may already use Match/No Match results from phone and address lookups as part of their automated screening, performing manual lookups with reverse lookup tools to see what other information is associated with a name, number or address can find connections and other data points to explore which may provide the evidence to decide whether or not to approve or decline a transaction. Often because of c