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Sharing ideas for better fraud prevention.

Are You Reviewing Too Many Orders?

“Are you manually reviewing over 20% of your incoming orders?”

That’s the question I ask whenever a merchant tells me that he doesn’t have a fraud problem. The answer, almost 100% of the time, is yes.

“What percentage of those reviewed orders do you reject?”

If your answer is the same as the one I described above, then I apologize to be the bearer of bad news, but YOU have a fraud problem.

Manual Review: Unrecognized Consequence of Fraud

Many merchants associate fraud with fake credit cards and chargebacks. While those are obvious signs of fraud, too much manual review is an overlooked indicator that perhaps there is something simmering beneath the surface. If you are reviewing a large percentage of your orders, ask yourself why? If no fraud existed, then every order simply just needs to be processed and fulfilled, both can be done somewhat automatically. If you are not looking to catch potentially fraudulent transactions, what ARE you looking for?

Manual review has a big monetary impact. The time spent and resources required for manual review are often financial liabilities overlooked by merchants as costs of fraud. Many merchants spend a lot of time reviewing incoming orders. Sometimes they spend hours- often staffing the team with multiple people. According to the 2012 CyberSource Online Fraud survey, the biggest cost of dealing with fraud is the staffing cost for manual review. The largest team that I’ve ever heard has about 50 members.

Adding Up the costs

For small merchants, if a merchant is paying a customer service agent 2 hours a day to review orders, even at minimum wage, the merchant must pay close to $500/month*. This is money taken from profit, away from operating costs or away from your marketing spending.

Save Time, Save Money

Since time IS money, the sooner you recognize that too much time is going into preventing fraud, the earlier you can become armed with the proper mentality and approach to save that money. Review your order screening process with critical eyes, look for patterns. Are there things you always check when you review? When you train your staff, what do you tell them to look for? With those answers, try to see if you can automate part of the process to reduce the number of orders slated for review. For example:

  • If you always reject orders from foreign countries, set your system so that it automatically rejects orders coming from foreign IP addresses.
  • or

  • If you always accept orders under $30, don’t spare even a glance, have your system automatically route that to processing/fulfillment.

Using tools to automatically accept good orders and reject obvious bad orders will save you time so that you can focus on those orders needing more detailed reviews.

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