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Clearsale Blog

What a Credit Card Fraud Analyst Wishes Businesses Knew

Rafael Lourenco

By Rafael Lourenco

Leading smart people to solve complex problems in dynamic environments is Rafael’s signature skill. As ClearSale’s VP of US Operations, Rafael combines the company’s innovation-driven culture and emphasis on communication with a deep understanding of the statistical tools that underpin excellent fraud protection. From his base in Miami, he oversees ClearSale’s US anti-fraud operation by leading its commercial, statistical intelligence and IT teams and providing technical and executive management for all the operation’s employees. During his 8 years with the company, Rafael has also planned and executed ClearSale’s international business unit, directed ClearSale’s statistical intelligence area, and helped manage the company’s growth from 25 to more than 700 employees, including more than 500 highly trained fraud analysts. Rafael has a distinguished academic background. He earned his master’s degree in economics and finance at FGV-SP (Fundação Getúlio Vargas-São Paulo), one of the world’s leading policy and economic think tanks. Rafael holds a bachelor’s degree with great distinction in statistics from UNICAMP (Universidade Estadual de Campinas), internationally recognized as one of the top universities in Brazil and in the world.

What a Credit Card Fraud Analyst Wishes Businesses Knew

Fraud protection isn’t always a top priority for e-commerce merchants – but the latest statistics suggest that may be a mistake. Card-not-present (CNP) fraud is estimated to rise to $6.4 billion in 2018, and businesses are at risk of losing an average of 5% of their gross revenues to fraud – a loss which is easily preventable.

Fraud prevention benefits every business’s bottom line. But selecting and implementing the right strategy requires careful consideration and focused attention. If you were to ask credit card fraud analysts for their suggestions credit card fraud prevention, how might they answer?

We asked two of the top ClearSale U.S. fraud analysts what they wish businesses understood about preventing credit card fraud, and their answers are below.

Don’t Think Fraudsters Can’t Find and Attack Your Business

Fraud prevention errors can make you an easy target for fraudsters. This speaks to the single biggest e-commerce security mistake ClearSale’s fraud analysts say businesses make: having no fraud prevention solution in place.

For cybercriminals, fraud is their profession, so they’re looking for easy opportunities to scale their criminal activity. When they find a vulnerability, they’ll use every tool in their arsenal to take advantage of it. And merchants can expect attacks to come in quick succession, since fraudsters know merchants will usually bolster security soon after they’ve been compromised.

But that’s not the only way a business can experience a catastrophic fraud attack. These analysts know that good news travels fast — but in the fraudster network, good news for them is bad news for you. If cybercriminals find your e-commerce site to be vulnerable, word spreads and you’ll find yourself under attack from multiple fronts. By then, it may be too late to stop the assault.

A Solid Fraud Prevention Strategy Can Boost Your Bottom Line

Businesses have myriad costs to manage; often, fraud prevention is considered just another overpriced expense. What merchants need to understand, ClearSale’s fraud analysts emphasize, is that the quality of a company’s fraud prevention strategy can have an enormous impact on a merchant’s bottom line.

A comprehensive fraud prevention strategy affects your business by:

  • Protecting against chargebacks. With penalties often ranging from $50-$100 — not to mention the lost costs of merchandise and shipping — chargebacks can quickly eliminate profit margins.
  • Improving order approval. A hybrid solution that combines human analysis with machine learning yields a more complete data set and better fraud protection, giving you more confidence when approving orders.
  • Minimizing fraud as a percentage of revenue. This number has been steadily on the rise — reaching 47% in 2016. Through fraud prevention, you not only protect your business against this preventable cost, you also strengthen customer trust and loyalty.
  • Maximizing staffing budgets and resources. There will always be an initial cash outlay with an outsourced solution. But over time, that expense will often be less than that incurred with an in-house fraud protection team. An outsourced solution can also save you from reputational damage and the opportunity cost of lost sales.

Consider Multiple Factors Before Choosing a Fraud Protection Solution

To prevent full-scale attacks on your e-commerce site, smart business owners need to establish a solid plan that covers a wide range of transaction types and situations. While businesses may first evaluate fraud protection solutions based on the promise of reduced chargeback costs or the cost of outsourcing an antifraud team, ClearSale’s analysts want you to know there are other considerations that are just as — if not more — important, such as:

  • Ensuring you have high-quality data available. An important factor that businesses often neglect is the quality of information available for a fraud protection solution to analyze. Too often, with the goal of improving end-user experience, businesses don’t gather enough information from their customers during checkout.

In turn, very little information arrives to fraud analysts, which could potentially damage the final decision and make it difficult to determine whether a transaction is fraudulent.

  • Measuring the rejection rate of transactions. Analysts say this is perhaps the biggest element in evaluating a fraud prevention strategy. Although any antifraud strategy works to block fraudulent transactions and reduce chargebacks, the real question is: How many transactions do you deny? The best strategy is one that scans transactions in a cost- and time-efficient manner and easily identifies and flags only suspicious orders.

The reason it’s so important to measure the rejection rate of your transactions is because you’ll lose revenue if you’re declining more transactions than you should. U.S. merchants lose $118 billion each year to falsely declined transactions. Is that a risk you can afford to take?

  • Distinguishing legitimate from fraudulent customers. If your system can’t tell the difference between the two, you may be losing more than revenue. You could end up sacrificing lifelong customers who are frustrated by declined transactions. By reducing the rejection level of good transactions, your business experiences can increase sales and profits.
  • Assessing a multilayered approach. A combination of machine learning and human intelligence can bolster your security and reduce your risk exposure by providing a comprehensive approach to fraud recognition.
  • Evaluating transaction risk using a broad range of data. The more data points your solution includes in its analysis, the better the quality of information that’s accessible to it. It’s easy for a business to neglect adding data points, transaction results and incident details — often because of technical or personnel limitations. But incorporating this information is essential to making your system smarter and more effective.

When it comes to integrating a fraud protection solution into your e-commerce environment, you need to ensure you’re selecting a solution that will protect you against the rising threat of CNP fraud. Talk with a ClearSale credit card fraud analyst today to learn how our multilayered approach can help you increase approval rates, protect against chargebacks and prevent fraud attacks.

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Rafael Lourenco

Rafael Lourenco

Leading smart people to solve complex problems in dynamic environments is Rafael’s signature skill. As ClearSale’s VP of US Operations, Rafael combines the company’s innovation-driven culture and emphasis on communication with a deep understanding of the statistical tools that underpin excellent fraud protection. From his base in Miami, he oversees ClearSale’s US anti-fraud operation by leading its commercial, statistical intelligence and IT teams and providing technical and executive management for all the operation’s employees. During his 8 years with the company, Rafael has also planned and executed ClearSale’s international business unit, directed ClearSale’s statistical intelligence area, and helped manage the company’s growth from 25 to more than 700 employees, including more than 500 highly trained fraud analysts. Rafael has a distinguished academic background. He earned his master’s degree in economics and finance at FGV-SP (Fundação Getúlio Vargas-São Paulo), one of the world’s leading policy and economic think tanks. Rafael holds a bachelor’s degree with great distinction in statistics from UNICAMP (Universidade Estadual de Campinas), internationally recognized as one of the top universities in Brazil and in the world.

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