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Case study

The balancing act of fraud management

Wednesday 6 April 2016 | 10:48 AM CET

James Hunt, CyberSource: Managing fraud effectively requires a balance which in an increasingly complex environment can be difficult to achieve

Each year CyberSource commissions a survey of businesses across multiple markets – one each in the UK, North America, Latin America, and more recently, Australia – to gain insight into their challenges and priorities for managing mCommerce and ecommerce fraud. In this article, I provide some of the key findings from our 2016 UK ecommerce Fraud Report, which is based on the survey conducted in September 2015, of 200 UK-based businesses across a range of market sectors.

Firstly, let me provide some context. To minimise fraud losses, you need to reduce the number of fraudulent transactions going through your systems. And to maximise revenue you need to ensure that genuine orders are able to be recognised and processed easily and speedily. All this while you’re making sure your operational costs are kept to the minimum.

Managing fraud effectively requires the balancing of all three areas, which in an increasingly complex environment can be difficult to achieve. Our latest survey of UK businesses indicates that fraud teams need to achieve this difficult balancing act without more budget or any reduction in pressure to deliver results.

Because of this, the report not only looks at trends and challenges facing fraud managers, it also discusses approaches available to help you respond.

Looking at our respondents' main ecommerce fraud challenges and their priorities for the next 12 months, it's clear that the balancing act looms large.

1. Fraud itself is under control

Interestingly, losing revenue to fraud is 5th out of the 6 challenges we asked about, whilst improving chargeback management is 5th of 6 priorities. This suggests to me that UK businesses feel they are largely in control of the traditional centrepiece of fraud management – minimising fraud losses.



2. But the balance isn’t yet right

The top challenge is manual review and the top three priorities all relate to doing it less (using analytics better and improving automated detection) or better (streamlining manual review). This may be because manual review is typically the largest fraud management cost, and can be a threat to the overall customer experience and to revenues if not done well.

The other top challenges are an inability to accurately measure fraud metrics by sales channel, which shows a focus on the omni-channel environment, and the risk of losing too many good customers when trying to detect fraud, which shows a concern with avoiding over-zealous fraud management which can hurt efforts to maximise revenue.

These results highlight that parts of the balancing act (maximising revenues and minimising operational costs) may need more attention.

3. The focus is on optimising fraud operations

These results indicate that fraud teams are focused on optimising their fraud operations to do more than achieve low overall fraud rates. They want to:

• Be more efficient, especially with regard to manual review
• Manage fraud better by channel
• Minimise the risk of turning away good customers

To benchmark your business, and view the full 2016 UK eCommerce Fraud Report, go to www.cybersource.co.uk/ukfraudreport.

You’ll find a whole host of fraud-focussed metrics covered in the report across a range of themes, including: fraud screening and manual review practices, top fraud detection tools used, management of mobile and global fraud, and fraud risk across multiple channels. And with added insights, we aim to show that the challenges of fraud management are often addressable – it can be possible to reduce fraud losses, operational costs and false positive all at the same time.

About James Hunt

James is the Director of Managed Risk for EMEA at CyberSource. In this role he has overall responsibility for our Managed Risk Service offering, including delivery and go to market strategy and pursues service innovation to ensure that the tools and solutions offered by the team continually evolve and deliver quality to CyberSource customers. Having been with CyberSource for 8 years, in his previous roles he helped some of the largest ecommerce brands across the world implement strategies to increase customer order acceptance and reduce fraud rates. With a fraud management career spanning over 14 years, James has previously worked at Net-a-Porter, LastMinute.com, ADP and NatWest.

About CyberSource

CyberSource, a wholly-owned subsidiary of Visa Inc., is a payment management company. Over 400,000 businesses worldwide use CyberSource and Authorize.Net brand solutions to process online payments, streamline fraud management, and simplify payment security. The company is headquartered in Foster City, California and maintains offices throughout the world, with regional headquarters in Singapore, Tokyo, Miami / Sao Paulo and Reading, U.K. CyberSource operates in Europe under agreement with Visa Europe. 

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