Selecting the Right Anti-Fraud Tool for Your Business

By Mark Dawes | 24 Mar 2016

Matching the right anti-fraud tool to your online business can be tricky, but these three top tips will help you pick the right tool for your business.

As an online retailer in the Asia-Pacific region, increasing sales is a constant goal. But an increase in sales can also bring increased costs stemming from e-commerce fraud and chargebacks. That’s why having a solution in place to help manage fraud is key. In this article, we’ll describe three guidelines for selecting the fraud-management solution best suited to your online business.

Globally, business-to-consumer (B2C) e-commerce is soaring and its strongest region is Asia-Pacific, with turnover of US$567 billion in 2013, according to the Asia-Pacific B2C E-commerce Report. Regional B2C e-commerce turnover from 2012 to 2013 grew 44.6 percent, the highest growth rate of all global regions. The region includes Australia, China, India, Indonesia, Japan and South Korea.

Card-not-present (CNP) fraud is also soaring, a global trend that follows growth in e-commerce and stronger security for card-present transactions, including EMV chip cards. Consider these statistics just in Australia:

  •  CNP fraud has grown by 230 percent over the past five years and jumped by almost $90 million in the past year alone, according to the Australia Payments Clearing Association report Australian Payments Fraud, Details and Data, 2015.
  • 18 months ago, click-and-collect fraud didn’t exist. Today it accounts for about 13 percent of fraud (according to Accertify statistics).

Having a fraud tool in place can help you combat these trends. Here are three guidelines for selecting the right fraud tool for your online business.

1 – Enable your fraud team

In the Asia-Pacific region, most sophisticated online retailers have a fraud team, but often they use manual techniques without the benefit of fraud detection technology. Ultimately the volume of transactions needing review becomes overwhelming. Enabling your fraud team means putting effective tools into their hands to quicken the pace and accuracy of fraud detection. Consider the following themes as you evaluate potential fraud solutions. And remember, there is no “silver bullet” solution, so selection criteria must match your business requirements.

Use automation: The tool should easily integrate with your payment gateway or e-commerce engine transaction data and automatically apply fraud detection rules and algorithms in real time. The tool should reveal fraud trends by linking a fraud incident to other transactions.

Use custom rules: Generic tools have limited value if they do not cater to specific industries. The tool should easily allow your fraud analysts to create custom rules tailored to your unique specifications and not require a PhD in statistics to write and interpret them. Look for the capability to create a view of a customer’s online behaviour to identify good and bad transactions. Profiling also helps merchants to minimise false positives.

Test and refine rules: A “rules sandbox” will allow you to test the efficiency of new rules using real historic customer data before deployment. Fraud schemes change over time, so test and refine rules often for the best results.

Use reports: The tool should provide you with easy-to-understand, near real-time custom reports that enable quick action by analysts. Reports should also keep upper management informed about fraud from a business perspective.

Screen more than financial transactions. Select a provider that can screen for many types of fraud, such as account takeover and loyalty fraud. This will help protect your brand and preserve profits.

2 – Extend capabilities with third-party data 

For effective fraud detection, incorporating additional relevant data can help online merchants improve performance. The fraud detection tool should, in compliance with applicable laws, automatically integrate third-party data sources to improve the reliability of fraud detection and minimise false positives. Here are some examples of capability extension with third-party data:

Shared fraud data: A shared fraud database is collected from multiple sources to provide a bigger picture on fraud.

Fraud services: Automatic integration of data from third-party anti-fraud services, such as Ethoca, can improve detection.

Email addresses: Adding specialised third-party screening tools like Emailage can help your tool correlate with live social media platforms to more accurately predict fraud.

Telephone numbers: Screening telephone numbers in live transactions with a third-party database, such as TeleSign, is another useful extension of a fraud tool.

Device fingerprinting: Screening fixed or mobile device IDs with data from a third-party service like InAuth, ThreatMetrix or iovation allows your tool to authenticate those devices prior to authorising transactions.

Step-up authentication: Integration of an industry standard authentication protocol, such as 3D Secure, allows merchants to push only the risky customers through the most onerous screening process.

3 – Augment your team’s reach with services 

The third guideline is all about the vendor’s ability to augment your fraud team’s reach with services. One objective of finding a solution with automation capabilities is to reduce the need for more people. This allows you to find fraud faster, more efficiently, and at a lower cost. But even with automation, you’re still going to need professional analysts to provide human insights in situations that aren’t clear cut. A vendor should be able to help you in these areas:

Global reach: A solution vendor with global operations and customers around the world will be able to provide you with comparative data-driven insights useful in your region.

Technical help: Make sure you get the professional help you need to develop and test rules, particularly in early stages of deployment.

Training: Your fraud team will need professional consultation. Ideally, your solution vendor will have a selection of training options and be able to teach your team on-site.

Managed services: Online retailers will have peak transaction periods, such as holiday shopping seasons for merchandise and travel retailers. A vendor offering managed services can augment your team during these temporary periods of peak demand. Managed services can also supplement your local team with overnight coverage for 24/7 operations.

In conclusion, a fraud detection tool is a vital part of helping online retailers to manage fraud. Enable your team with a good tool, extend its capabilities with useful third-party data, and augment your team’s capabilities with the vendor’s professional services, and your organisation will be well on its way to achieving its goals for limiting fraud.

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