Burned in its early days, Ice.com remains vigilant against potential fraud

Ice.com is putting in place even more tools and programs to spot and eliminate potentially fraudulent transactions, Ezzie Shaffran, vice president of risk management tells Internet Retailer.

Today, Ice.com has among the lowest chargeback rates in the online jewelry space with between 10 and 15 basis points, the company says. The rate is low because Ice.com has been aggressively expanding its fraud prevention program since 2000.

The web retailer, which had total 2004 online sales of $27.2 million, now uses a variety of tools and programs to spot potentially fraudulent transactions that are flagged by the company’s risk management and credit scoring programs.

For instance, Ice.com looks carefully at order frequency, dollar volumes and IP addresses to resolve potentially fraudulent transactions, including analyzing and verifying a non-North American IP address if it looks suspicious. A foreign IP address raises a red flag within Ice.com’s order management system and prompts an e-mail and perhaps a follow-up call from Ice.com to verify the customer’s personal identification, shipping address and card information. “In 2003 we ran a study and found that between 72% and 76% of chargebacks and possible fraudulent transactions came from orders that were flagged as having a foreign IP address,” Shaffran says.

To prevent fraud, Ice.com is also using a program that lets the retailer check a large database of public and specially collected information to cross-check a customer’s billing and shipping information. The program, Advanced Fraud Screen from CyberSource Corp., provides fraud risk prediction scores by assessing over 150 order variables such as domestic and international address validation, domestic and international IP address verification, and order velocity.

Ice.com began implementing and refining a formal fraud prevention strategy after it was “burned for a couple of $3,000 hits” when the company was smaller and just beginning, Shaffran says. Today, Ice.com is very proactive on fraud prevention and will remain so, Shaffran says.

“By its very nature, jewelry is high risk and the majority of our transactions happen where the customer’s billing and shipping address are different,” Shaffran says.