April 24, 2003, 12:00 AM

Finish Line cuts chargeback rate to less than 1% with fraud screening tool

High-end athletic shoes are a hot property, but a new security system is reducing scams from "an alarming rate" to 1%, Finish Line says.

High-end athletic shoes have become a hot property: they’re a big-ticket item, a status symbol in urban markets, and many models, produced in only limited quantities, are hard to find. As such, they have high resale value--so much so that FinishLine.com, the online arm of athletic shoe retailer Finish Line Inc., was the target of Internet fraud rings until it brought the problem under control, director of e-commerce Kent Zimmerman tells InternetRetailer.com.

FinishLine’s chargeback rate on online transactions, up to an “alarming” rate last year, has been less than 1% of sales for the past several months since the retailer has been using CyberSource Corp.’s screening tool, Advanced Fraud Screen Enhanced by Visa, Zimmerman says. The tool assigns a score to every online purchase that reflects a cumulative rating based on as many as 100 tests applied to 18 data points the system collects on each purchase transaction. These include risk factors such as whether the purchaser has changed addresses frequently in recent months or whether other merchants have experienced fraud against the submitted address or credit card number.

Orders attached to scores that fall below a set threshold are processed without further investigation and most orders attached to scores that fall above a certain threshold are rejected outright. That leaves about 20% of orders in the middle range that require further checking. Finish Line does that manually, a process that goes much faster than formerly because the CyberSource tool flags the company on exactly which aspects of the order need to be verified. “Of that 20%, we probably wind up canceling only about 10% to 25% for fraud,” says Zimmerman.

It’s a major shift from Finish Line’s earlier online fraud policy, which had rejected any order that could not be verified by AVS (Address Verification Service). But feedback from customer service suggested that the policy, while reducing fraud, also was leaving money on the table in the form of legitimate orders; for example, from customers using debit cards from smaller banks that weren’t part of the AVS network.

Finish Line then went beyond AVS to set some more discrete internal parameters that would trigger further investigation of orders that fell within them. That worked until online sales volume ramped up and the manual investigation became too time-consuming. The company then implemented the CyberSource tool and called the vendor in for a one-week consultation on how to use it. That included making a determination of how fraud rings were able to detect Finish Line’s fraud parameters and place orders so they fell outside of them.

“Our online revenues doubled last year,” Zimmerman says. “I can’t imagine how we would have handled that kind of growth if we hadn’t had a solution like this in place. As big of a problem as fraud was last year, it’s nice to know it’s not a blip on the radar screen now.”

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