Following up on our post, 3 Things to Consider When Thinking About Your Fraud Prevention Strategy, in which we pointed out the importance of treating manual review as a cost, we want to develop that idea further and do some calculations to let the numbers speak for themselves.
3 Reasons why SMBs manually review more orders than others
According to last year’s Cybersource Online Payment Fraud Trend Report (get the full report here), merchants, on average, review about 27% of all orders. However, for SMBs with less than $5 million in annual revenue, the rate jumps to about 33%. For companies having annual revenue between 5 to 25 million, the review average stands at an astounding 45%.
The spike in averages can be due to various reasons. From our own experience, we think many SMBs tend to review more orders because
- They are not as knowledgeable or experienced with available validation tools;
- They are not factoring in the cost efficiency of these tools when compared to the time cost of manual review; or
- Manual review has worked for them and they don’t see a reason to change. In many cases, the cost of obtaining tools or a fraud problem is cost prohibitive.
How much is your time worth?
Let’s assume that you receive about 500 orders a month. Let’s assume, also, that your review rate is 25%, which is below both the industry and SMB averages. This means you are reviewing about 125 orders a month.
500 orders x 25% = 125 orders
Lets also assume that an average order takes about 10 minutes to review, you are looking at spending about 21 hours a month, that’s if you are reviewing only about 25%. If you are like most SMBs and rely heavily on manual review (45%), you are spending a whopping 37.5 hours a month. That’s almost a full week worth of work.
500 orders x 25% x 10min = 20.83 hrs (1250 mins)
500 orders x 45% x 10min = 37.5 hrs (2250 mins)
When you translate the number of hours into dollar terms, even at $10/hour rate, you are essentially spending anywhere between $200 to $375 a month, just to keep up with your incoming orders. While it can serve your shore term needs, this extra time/financial burden is not a long term solution in terms of efficiency and scalability.
So how much is your manual review costing you? Use our manual review cost calculator to find out.