Fraud management – the secret sales weapon?

Fraud managers are focused on minimising fraud and chargebacks. How do they begin to look beyond this to support sales as well?

Fraud managers are in a great position to help drive merchant sales and support checkout conversion rates – partly because they have access to a rich array of data gathered from customer touchpoints across the business as well as through external sources. This needs to be the starting point for fraud managers in their mission to support sales.

With this data, fraud managers can build a picture of both fraudster and customer behaviour to help establish an accurate context for fraud management – ensuring that strategies and tools are equally effective in identifying fraud and supporting high conversion rates.

There are two important factors to consider when looking to use data for this dual purpose. Firstly, the richer the data is in terms of volume, velocity, and variety the more accurate and effective fraud detection strategies become – in turn reducing any negative impact on genuine customers and increased checkout conversion rates. This requires constantly collating and analysing real-time data from internal and external data sources to ensure merchants have the full picture behind each transaction.

Secondly, fraud managers must place equal focus on profiling genuine customers as well as fraudsters. This empowers fraud managers not only to reduce false positives, but provides the opportunity to proactively identify genuine transactions and make sure those customers are treated differently – perhaps by fast-tracking their order through the system, or by offering them different payment or superior fulfilment options through alternative channels that they may not want to offer to higher-risk customers. It is this type of proactive thinking that can make a big difference to the customer experience – significantly boosting loyalty and conversion rates, particularly in a competitive retail environment.

Fraud management systems are also geared towards preventing loss – how can they be used to drive checkout conversions?

It is absolutely vital that merchants evaluate a broad range of fraud prevention technologies and techniques to ensure they use only the right tools for their individual business – and in a way that does not block or deter genuine shoppers. To get the best results and ensure that fraud is not mitigated at the cost of sales and poor customer experience, fraud managers need to ensure they take a multi-dimensional, holistic approach, looking not only at the individual tools and processes they are using, but increasingly at how they work in combination with one another.

For instance, tools like velocity checks and IP Geolocation can be helpful in flagging suspect transactions, but, without acting in sync with other tools and fraud rules to form a more informed picture, they can inadvertently trigger declines on genuine sales. Even the most modern, cutting-edge fraud detection technologies, such as machine learning algorithms, can have their limitations when used in isolation and must be deployed in a comprehensive, balanced fraud strategy. Properly trained machine learning models are excellent at accurately pinpointing fraud while analysing large volumes of transactions against vast data sets, reducing false positives and ensuring genuine customers do not get unnecessarily declined or delayed by manual review processes. However, because these analytic models learn from experience, they can underperform when customer buying patterns suddenly move away from the norm – so they too must be used as part of a holistic solution. As an example, with the rise of social media and easier shopping channels, such as mobile channels, a surging interest in a new product presents the opportunity for new increased sales and revenues, although it will not be reflected in historical data. In contrast, sophisticated fraud operations will also seek to ‘test and learn’ for gaps in the algorithmic updates frequently.

Furthermore, it is also important to make sure that fraud rules and processes are closely tailored to the complexities of each individual merchant business, in line with their sector and in each market they sell. Customer buying patterns and preferences vary across geographies and verticals, and fraud managers must account for these varying trends in their fraud strategies to ensure that genuine customers are welcomed while fraudsters are shut down.

With all this data and technology working to prevent fraud and support sales, is there still a place for fraud analysts to play an active role in this process?

Absolutely! Almost every fraud management tool and process needs to be configured and actively managed by experts to get the best value and to make informed business and fraud decisions. Also, where the fraud platform itself performs the majority of the analysis, experienced fraud analysts are able to focus on reviewing data and trends – taking steps to optimise platform performance as new behavioural patterns emerge. It is this constant monitoring and fraud strategy management that ensures that both fraud detection and conversion rates are managed effectively.

Fraud analysts also play a vital part in protecting sales when merchants enter new markets or launch new products as well as during seasonal sales peaks – by proactively preparing fraud management strategies that cater for planned changes and monitoring performance throughout. These types of events present a unique window that fraud groups frequently exploit. They can also help to provide a valuable window to customer behaviour and purchasing trends, helping to assist sales and marketing teams in making informed decisions about their own strategic approach.

For more advice on managing fraud and sales performance, download our new insight paper ‘Driving Up Conversion with Effective Fraud Management’.

About Andreas Suma

Andreas Suma leads the product group for fraud and data at ACI Worldwide, where he focuses on the expansion of ACI’s fraud capabilities throughout the payments ecosystem. Previously, he operated as the GM of Latin America for ACI Worldwide, based in the Sao Paulo office. Prior to joining ACI, Andreas was a Partner at IBM and had leadership roles at FICO in Latin America and the US.

About ACI Worldwide

ACI, the Universal Payments company, powers electronic payments for more than 5,100 organizations around the world. More than 1,000 financial institutions and intermediaries as well as thousands of leading merchants globally rely on ACI to execute USD 14 trillion each day in payments.