January 8, 2004, 12:00 AM

How PC Mall reduced the number and review time of possibly fraudulent sales

By automating the review of potentially fraudulent transactions, PC Mall has reduced the number of transactions in need of manual review by 10% and resolved many flagged orders in under 20 minutes. Some reviews used to take 24 hours.

Nearly 60% of online merchants report fraud rates of 1% or more, but automated systems can help retailers contain fraud by reviewing suspicious transactions more quickly.

Fighting fraud is an every-day battle for higher-end merchants such as Torrance, Calif.-based PC Mall. On a typical business day, as many as 30% of the electronics retailer`s transactions may be flagged by an online fraud detection application for further review by a payments processing employee.

Before automating the process, a PC Mall employee would need three hours to a full business day to review a single transaction before sending it for final processing or turning it over to other parties and law enforcement officials for further investigation.

With the process automated, PC Mall has reduced the number of transactions in need of manual review by 10% and resolved many flagged orders in under 20 minutes. "We`ve speeded up the order-taking and completion process by expediting our internal review system and automating procedures," says Kenneth Sayers, director of credit at PC Mall. "Integrated computer systems make transaction verification easier and faster to achieve."

Prior to integration, once suspicious transactions were flagged by PC Mall`s fraud detection system for review, each order had to be placed in a special database and manually reviewed by one of 15 full-time employees. Fraud detection specialists compared the customer`s shipping and billing information against other internal databases and then called the merchant bank or the credit card company to cross-check the information. If the validity of the transaction was still in doubt, a PC Mall employee would call the customer and verify all appropriate information, including shipping address, phone number and credit card number.

Working with its internal information technology staff and CyberSource, a provider of risk management and electronic payment solutions to Internet retailers, PC Mall has automated most manual reviewing procedures and integrated its fraud detection systems with new applications that automatically cross-check a transaction against repeat customer, shipping and billing information databases.

The new system can check a red-flagged transaction to see if previous orders were sent to the same address using the same credit card and shipping carrier.

"There are certain ZIP codes in Florida and New York where the rate of credit card fraud is higher. Criminals there like to order big-ticket electronics and have the merchandise shipped priority overnight," Sayers says. "We can now analyze these potential transactions much more quickly, deal with problems if they occur and get legitimate orders on their way."

PC Mall began improving the performance of its fraud detection system almost two years ago, but the retailer is always adding ways to improve performance. New applications will include more SKUs in the comparison databases and analyze problem transactions in more detail by time, date and geographic region.

"We are improving time savings, but being no less diligent in looking for potential fraud problems," Sayers says. "With the performance measures we`re taking, we`re getting legitimate orders on their way to the customer as fast as possible."



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