Automating the online fraud fight

Fraudulent transactions among leading e-retailers is down to less than 1%, according to a recent survey from CyberSource Corp. But keeping them at that level has become a time-consuming job. To do it, merchants are applying a growing list of checks and balances—address verification, card number verification, user authentication programs, commercially available fraud screening programs and their own business rules—to every transaction. In fact, merchants are now reviewing almost one out of every four online orders, according to CyberSource.

A new product from CyberSource is aimed at reducing fraud by simplifying the order review process needed to keep it low. Decision Manager, a hosted service, incorporates elements of its existing risk management product, CyberSource Advanced Fraud Screening Enhanced by Visa, but with a twist: it’s rolled them up into a user-friendly interface that puts control of all of the different fraud screening tools in one place. That puts control of the process into the hands of the business managers responsible for loss prevention.

With rules on risk profiles for order acceptance generating more outliers requiring the attention of business staff, and any changes to the rules and the screening process requiring the intervention of IT, order review has become unwieldy, says Bruce Hydorn, director of marketing at CyberSource. “We will never completely eliminate manual review, but we can help merchants dramatically cut the number of orders that they have to review themselves. And for the ones they have to review, we can make order review and disposition more efficient,” says Hydorn.

Hydorn adds that CyberSource`s research indicates as much as a quarter of online merchants` operations are affected by an inefficient order review process, including actual fraud that slips through the cracks, perhaps 3% of orders that are rejected based on screening but may actually be valid, and the nearly one in four orders that are questionable and require review.

While Decision Manager, to launch next week, is already in use by retailers such as K-Swiss Inc., Hydorn says it’s too soon to quantify its impact on the order review process. However, with elements of CyberSource’s existing fraud screening tool for IT deployment also built into Decision Manager, Hydorn notes that merchants using the existing product need to review 40% fewer orders than average. 37% fewer orders are outright rejected in screening, and overall, merchants incur 40% less fraud. By giving control of the screening process to business managers, Hydorn says, Decision Manager is expected to generate additional upside beyond those numbers.