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8 Million Reasons to Think Carefully About Build vs. Buy Fraud Prevention

posted on: Tue May 02 2017

Actually, $8.39 million. That’s how much more The Fraud Practice projects building a fraud prevention solution will cost versus buying a fraud prevention solution.

The Fraud Practice ran a 5-year Total Cost of Ownership (TCO) projection, using industry standard costs and benchmarks to project the estimated expenses for an eCommerce operation processing 10 million transactions in year 1 and experiencing 7% growth in years 2-5.5 Year Total CostThe example assumes a new company with little or no fraud prevention capabilities. Established eCommerce operations with existing fraud prevention capabilities may experience lower upfront costs, but recurring costs will remain the same.

Keeping in mind that enterprise-class fraud prevention is the goal – with its strong ROI in the form of reduced fraud, increased revenue, and lower fraud mitigation costs, eCommerce operations and fraud departments should consider the following:

BUILD: For most eCommerce operations, the build approach will be more expensive, require more time, and impact headcount significantly. Even so, there are some cases where the build approach can make economic and operational sense:

  • Huge operation and transaction volumes (+$500 million/year)
  • Access to unique data
  • One-of-a-kind transactions/customers

BUY: The vast majority of eCommerce operations will experience maximum ROI by choosing the buy approach:

  • Lower upfront and recurring costs
  • Less time required to implement and maintain
  • Reduced headcount and personnel costs
  • Simpler security and compliance

The chart below summarizes the differential in the 5-Year Total Cost of Ownership:
5 Year Total Cost

For a deeper dive into the costs and ROI of implementing an enterprise-class operating fraud prevention system, view a recording of the webinar: “Should You Buy or Build a Fraud Management Solution? Watch as Justin McDonald, Senior Risk Management Consultant at The Fraud Practice, discusses the 15+ line items you need to evaluate when considering a fraud prevention investment.

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