An Ecosystem for Good – Battling the Lifecycle of Fraud

Today’s cybercriminal has an advanced skill set that is backed by burgeoning technology and extensive resources. Some criminal outfits mirror corporate America, complete with a well-trained technical staff, a detailed organizational structure and employee best practices. The level of sophistication is mind blowing, and the result is a well-coordinated and highly intelligent ecosystem of fraud.

Unfortunately, it’s almost impossible for merchants to keep pace. Combating the latest fraud trends and staying current on technological advances is extremely difficult, not to mention costly. Merchants are left scrambling, fighting in an arena where they are over matched and underfunded.

When battling ecommerce fraud, it is important to fight fire with fire. The most effective fraud solution can stand up to the most sophisticated criminal activity by addressing the full lifecycle of fraud and casting a web of well-coordinated intelligence.

The solution combines advanced technology with human ingenuity and fosters seamless communication throughout the offering. This approach helps to establish its own ecosystem of people, processes, and technology. An ecosystem for good. Let’s take a walk through the lifecycle of fraud and show how a comprehensive solution interacts every step of the way.

The Fraud Technology Lab is the first road block in the way of an ambitious criminal. Here, machine learning and predictive analytics spawn data driven intelligence. While highly technical and not well understood by merchants, cyber criminals know this adversary all too well.

The Fraud Technology Lab and the data scientists who staff them are defining characteristics of a premier fraud solution, constantly evolving with the changing tides of technology and fraud. It is very important to continually invest in data and technology to augment the critical role human intelligence plays in thwarting fraud.  Not only will this contribute to the health of the overall solution – but let’s face it – criminals are making the same investment on their side.

While machine learning and technology are incredibly important, it cannot shoulder the whole load.  There are many fraudulent orders that evade the first layer of detection and need a set of eyes on them to review. However, it is very important that the population of orders held for review is fraud-rich and an extremely low percentage of the overall orders placed. A highly efficient rules engine will drive this. The rules engine should be dynamic and continually improving to ensure the right orders are targeted.

Once a fraudulent order is strategically plucked for review, not just any set of eyes will do. A team of well-trained fraud investigators should be in place to shoulder the responsibility of probing for fraud while also ensuring a tremendous customer experience. This means they are not just measured on preventing fraud, but on overall quality of decision, productivity, and customer satisfaction. It’s important to understand that a commitment to order review is not a commitment to longer review. Implemented properly, it’s a calculated strategy that delivers the most accurate decisions and the most conversions in the shortest possible time.  The result – a healthier bottom line and fantastic customer experience.

If a fraudulent order happens to escape the clutches of the fraud investigation team, not to worry, an overwatch team delivers another layer of defense. Overwatch analysis is a layer of fraud detection that consists of high level data analysis. The analysts are able to identify large pockets of orders, both fraudulent and good, in order to take action immediately and in high volume. These analysts thrive on big data analysis and perform linking and tagging functions to ensure data quality.

What happens if a fraudulent order is fulfilled and en route to its final destination? Post-transactional analysis can still save the day. This layer of fraud mitigation focuses on stopping fraudulent orders in transit. In order to successfully execute stop shipment requests it is imperative that the fraud department has quick and seamless interaction with fulfillment specialists.

One of the reasons criminals flock to ecommerce sites is because they can operate with anonymity. Or so they think.  A massive amount of data is processed during e-commerce transactions. If a fraudulent order does get processed, the fraud solution can utilize that data to learn a great deal about the criminal and how to guard against future attempts. Fool me once shame on you, fool me twice shame on me. Fool me a third time and you probably need a new fraud solution! The strategy & analytics team and the fraud investigation team collaborate on this analysis. Each team provides a unique perspective on how the fraud occurred and the best steps to prevent it going forward.

Finally, the fraudulent order is laid to rest by the chargeback recovery team. Just because an order is disputed as fraud does not necessarily mean it is fraud, and more importantly, does not necessarily mean a merchant is liable. Merchants should have a dedicated team of chargeback recovery analysts fighting these disputes, and working to recoup every dollar that is owed to them. These analysts must be experts in chargeback rules and procedures. The credit card issuers have mastered this rule book and merchants who are uneducated and unprepared will see their profits depleted by fraud disputes.

Like any relentless foe, each time one attack is stifled, two more are waiting in the wings. Well-funded and incredibly organized, these eCommerce adversaries are only growing stronger and smarter. To stand a fighting chance, merchants should unleash their own ecosystem of intelligence. A well-coordinated blend of people, processes, and technology will provide the most comprehensive protection, while converting the most orders and delivering a fabulous customer experience.

PJ Rohall is a Supervisor on the Fraud Management Solutions Team at Radial. 

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