Merchants of all sizes use manual review to fight online payment fraud, and even in the highly automated online environment, they still do so frequently. All merchants who conduct reviews manually did so on 32% of all orders they received in 2008, about the same as the 33% reported in 2007, according to CyberSource Corp.’s 10th annual survey on e-commerce fraud.
Smaller merchants review a higher percentage of online orders—perhaps, suggests the report, because their lower order volume permits it. Online retailers with annual revenue of $500,000 or more but less than $5 million reviewed 35% of their orders manually in 2008, while merchants with annual revenue of less than $500,000 reviewed 51%. By contrast, merchants with revenue of $5 million or more but less than $125 million reviewed only 34% of orders manually in 2008, and those with revenue of $25 million or more reviewed 15% of orders manually.
“Even larger merchants review a significant percentage of online orders—and likely devote more resources to this task than is operationally warranted,” notes the report.
Merchants performing manual review use a wider variety of tools and processes than typically are used in fully automated screening. Attempting to validate an order by contacting the customer directly is standard practice at 70% of all merchants in the survey and at 82% of the large merchants, defined as those with annual revenue of $25 million or more. Another frequent practice in manual review is to contact the card issuer, which is done by almost half of all merchants surveyed and by 60% of large merchants.
In 2008, two-thirds of merchants overall used four or more fraud detection tools during manual review, with 4.9 being the average. Larger merchants reported using 6.1 fraud detection tools on average during manual review.
CyberSource’s report notes that given the time required to recruit and train workers in manual review techniques, staff retention is one key to optimizing the process. 15% of all merchants said their review staff was new, but the figure was higher, 24%, at large merchants. “Fraud rates or order rejection rates can increase if highly experienced review staff leave an organization and are either not replaced or replaced by less experienced reviewers,” the report says.
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