The Clearsale Blog

Oct 8, 2020 Fraud Management

How Management Should Contribute to Fraud Protection

How Management Should Contribute to Fraud Protection

As companies grow, management often delegates business-critical tasks—marketing, technology, fraud prevention—to different departments. While it might seem to be an efficient way to get things done, departmental leaders might end up adopting programs that sound good in theory, but don’t align with the big picture. The result? Siloed operations are not only efficient, they fail to make a strategic impact.

Fraud prevention, like so many other parts of a successful business, shouldn’t be seen as a purely operational service. To ensure a company is choosing the right fraud tools—and then using them properly—the executive team should be involved every step of the way. Here are two strategic decisions management should be making in conjunction with their fraud prevention team.

Deciding Whether to Expand to New Markets

With global online sales expected to top $4 trillion by 2025, it’s no surprise that online merchants are eager to expand into the international markets with the biggest potential. But expanding comes with its own set of challenges: new customers, new shopping habits and new ways of doing business. And these challenges are often accompanied by new fraud, chargeback and false decline risks.

Before you start selling in another country, your management team must understand the challenges your e-commerce may face upon expanding, such as:

  • Legal issues. Are you familiar with the laws of the country in which you plan to do business? Taxes, import duties and regulations will certainly affect how you process transactions, and they may be significantly different from what you’re used to.
  • Language and culture barriers. Nuances in languages mean that business dealings, contracts and customs don’t always translate well. Using a translator who’s fluent in your native language and that of the country in which you’re doing business can help protect your business from an increased fraud risk.
  • Product sales and data protection. Different countries have different expectations and legislation regarding product sales and data protection. Protect your business by becoming well-versed in how other countries respond to misuses of personal data and failures to keep sensitive information secure.

Keep in mind: When you expand, the volume of incoming transactions will increase. That means already-busy fraud teams may end up overwhelmed. And when that happens, so do mistakes.

Your in-house fraud teams may start automating fraud order reviews to try to keep pace. Unfortunately, that means low-risk transactions will be accepted automatically, and high-risk transactions will be declined automatically. Manual reviews will be saved for only those transactions that fall in the middle. This may sound like a reasonable course of action, but it comes with the risk of spoiling your expansion just as it’s begun – especially if you’re expanding into a higher-risk area. Why is this? It’s because of the increased risk of false declines. And as it turns out, evaluating false declines is another area in which upper management should be heavily involved.

Evaluating the False Declines That Don’t Appear in Reporting

False declines happen more often than you think. In fact, 15% of all cardholders have experienced a false decline in the past year (according to Javelin), and 58% of declined transactions are legitimate orders. While these are significant numbers, most e-commerce merchants won’t see these numbers appear as a line item on any reports they run. Why not?

One of the biggest ways false declines can impact your business is by frustrated customers simply taking their business elsewhere and vow never to return. And that can have a compounding effect, with false declines eventually costing merchants up to 13 times as much (nearly $118 billion) as fraud.

Even worse, disgruntled customers often take their grievances to social media. That may seem harmless enough until you consider the power of the “negativity effect,” in which negative ratings and feedback can be more credible and influential to consumers than positive information. As a result, many purchasers make their buying decisions based on the worst-case scenario — even when they also see positive reviews.

Unfortunately, most merchants don’t realize they’re being impacted by false declines until they see these social media posts or see an uptick in frustrated calls to customer service. But that doesn’t mean management can’t take an active role in preventing these false declines. By adopting a fraud prevention solution that makes decisions based on data, not assumptions, management can help stop these false declines before they have a chance to hurt your business. After an artificial intelligence-based solution looks for common fraud patterns, expert human agents look beyond the algorithm to capture details that machines cannot. These fraud analysts are trained to consider all the evidence before making their decision and never risk leaving money on the table. Management should work closely with these fraud analysts to make sure they have the important insider information they need to correctly analyze transactional risk.

Management’s Responsibility to Keep Fraud Rates Low

When it comes to effectively preventing fraud, chargebacks and false declines, fraud prevention solutions shouldn’t be approached with the mindset of “set it and forget it.” In-house fraud departments have one job to do — stopping fraudulent transactions — so they generally aren’t concerned with how they’re impacting revenue or the customer experience.

But management should be.

Offering robust fraud protection alongside attentive customer service gives e-commerce merchants a distinct advantage over their competitors. But to get that advantage, senior executives must understand how fraud management contributes to the company’s overall success. And that means breaking down siloed fraud management operations, facilitating information sharing, and creating real-time decision flows that balance fraud risk and the customer experience.

At ClearSale, we can help you do just that. Our combination of advanced artificial intelligence and a highly trained team of professionals lets you deliver a high-quality customer shopping experience without sacrificing safety and security. Reach out to one of our fraud analysts today to learn more.

You may also like

[Industry Focus] Fraud Risk Profile for Nutraceutical and Drug Retailers

[Industry Focus] Fraud Risk Profile for Nutraceutical and Drug Retailers

As people become more conscious of what they’re putting into their bodies, there’s been an increased demand for high-quality supplements and healthful food and beverages. The result has been a..

3 Ways Tech Can Benefit Remote Teams

3 Ways Tech Can Benefit Remote Teams

Ecommerce businesses are used to an ever-evolving digital connection between them and their customers. But 2020’s COVID-19 pandemic has resulted in that digital connection making its way into the..

Shopping Habits by Gender: What’s Changed in 2020

Shopping Habits by Gender: What’s Changed in 2020

Do men hate shopping online? Are women more worried about fraud?

“I Don’t Need Fraud Protection — My Business Isn’t at Risk!”

“I Don’t Need Fraud Protection — My Business Isn’t at Risk!”

As an e-commerce merchant, you know the risk of fraud, false declines and chargebacks. But maybe you think it won’t happen to you because you’re a relatively new — or small — e-commerce merchant,..

How Backtesting Can Improve Fraud Prevention

How Backtesting Can Improve Fraud Prevention

They say hindsight is 20/20, and that’s especially true for e-commerce merchants looking to increase their approval rates and decrease fraudulent transactions. It’s easy to look back at..

Is Fraud Risk Scaring You Away From International Shipping?

Is Fraud Risk Scaring You Away From International Shipping?

With cross-border shopping estimated to make up 20% of e-commerce in 2022, many merchants are right to consider expanding into other countries. So what’s stopping them from pulling the trigger?

Preparing Your E-Commerce Store for the Holiday Season

Preparing Your E-Commerce Store for the Holiday Season

It might still be summer on the calendar, but the holiday shopping season is just around the corner.  Are you ready?

Impact Analysis: Declined Transactions vs. Fraudulent Transactions

Impact Analysis: Declined Transactions vs. Fraudulent Transactions

Selling products and services online offers great opportunities for merchants, but it’s not without risk. Savvy cybercriminals use stolen personal data to defraud merchants, and sometimes, a..

Why Manual Fraud Review Is Worth the Wait

Why Manual Fraud Review Is Worth the Wait

“We don’t have time to manually review transactions.” It’s a common refrain among e-commerce merchants. They know that customers are fickle and that they’ll go where they can get quick, accurate..

Want to write
for our blog?

Please review our writers' guidelines
https://www2.clear.sale/press/clearsale-guest-blog-guidelines
and then email guestwriter@clear.sale with your pitch!

Subscribe to our blog