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Boosting Sales Through Better Fraud Management

posted on: Wed Jun 22 2011

What is more important, increasing revenue or reducing fraud losses?

At a recent conference I attended I heard someone say, “We can’t expand into that area, the fraud would kill us.” I asked him the same question, what is more important, increasing sales or reducing fraud losses? He said that he was afraid of going into certain known high-fraud areas because it would jeopardize his overall merchant account status, increasing chargebacks and other fraud related losses. He didn’t think it was worth it.

I don’t believe this guy was alone in his thinking. Consultants I talk to tell me that many merchants turn off IP addresses or whole countries from their system not allowing any purchases to take place. That seems like taking a butcher’s approach when a surgeon is what is really needed.

Proper fraud management can help companies increase sales by:

  • Allowing them to accept more orders
  • Expanding into markets or geographies with confidence
  • Reducing rejection rates of suspect transactions

The truth of the matter is, the 2010 CyberSource Fraud Survey showed that the average U.S. merchant turns down 2.7% of orders due to suspicion of fraud. Internationally, the number almost triples to 7.8% of orders. Merchants spend millions of dollars every year in marketing, SEO and converting visitors to buyers only to reject a substantial percentage of orders at the shopping cart/checkout point in the buying cycle.

How do you turn a fraud department into a revenue-positive department rather than a cost center? Reduce the number of rejected good orders. If your team could cut the number of rejected orders in half, that would be an enormous step toward corporate sales goals and the cost is easy to show ROI.

What if you could open new geographies because your fraud solution was just as effective in South America or Africa as it is in the U.S.? The Wall Street Journal reported just a few weeks ago that most CFOs are looking to expand into new markets as a way to grow their businesses.

The Internet is a global marketplace. Stop reducing your ability to take advantage of global market because your fraud solution doesn’t work well enough.

Have you beaten fraud and increased sales at the same time? Tell me about, email me at don.bush@kount.com.