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What Are Your Fraud Rules Costing You?

posted on: Wed Aug 27 2014

With new data breaches being reported almost daily, you might think the biggest threats to your bottom line are all external. But if your fraud system isn’t optimized for your business, the same solution that’s protecting you from external threats is also costing your business thousands in lost sales, added resources, and time spent reviewing transactions on top of what your system costs.

While several factors determine the effectiveness of a fraud solution, one of the biggest impacts we see regularly are fraud rules that contradict one another, limit legitimate sales or simply generate more manual reviews that require more resources. Here’s how each may be impacting your business:

  • Rule collision: The more fraud rules you have, the more likely it is that one rule is trumping another – either increasing your exposure or impacting sales. For example, you could have a device-specific rule that limits the transaction total on an iPad to $75, another that is geography-specific with a different purchase threshold and yet another that flags any transaction with different shipping and billing addresses. So what happens when someone with an iPad in Canada sends a $100 gift to a friend in the states? Which rule wins? And if everything else is legitimate, why risk losing a sale when a transaction is delayed? (See Rule on Rule Crime: Why Less Fraud Equals More Sales for more details about rule collision)
  • Denied sales: Whether its previous experiences with international fraud or blanket rules that don’t evaluate all factors involved in a transaction, many merchants are simply denying legitimate sales out of fear. The right fraud solution should not only minimize your risk, it should allow you to sell more to more people in more peoples. Busted Tees learned this firsthand, with their General Manager Adam Schwartz saying it best: “We added 30 high risk markets we used to avoid due to fraud concerns. Now we are getting lots of sales from those markets, but no higher fraud.”
  • Excessive manual reviews: Many of our initial conversations with clients revolve around manual reviews, specifically the impact on time and the resources needed to look at transactions that appear questionable. These costs add up quickly and, even more infuriating, an overwhelming majority of these transactions are approved anyway. With the right rules, a good fraud solution should limit the number of manual reviews. A great solution will minimize both the number of reviews and the time you spend reviewing each suspicious transaction.

Beyond saving time and money on internal processes and opening up additional sales opportunities, fraud rule customization also enables your business to stay ahead of evolving fraud and additional loss, including tactics specific to your industry.

Jagex, the UK’s largest independent developer and publisher of online games, was seeing the threat of “gold farming” impacting their user experience – thieves were using stolen credit cards to rack up virtual currency at a much faster rate and sell it for real money. We helped them thwart this tactic by allowing rules to be customized to their business.

Jagex Fraud Manager Dave Parrott summed up how important rule flexibility is to them: “Kount offered us something other companies couldn’t: the ability to write our own custom rules that apply to our unique situation. I didn’t have to buy someone else’s pre-packaged sets. One of the deciding factors was how easy Kount makes it to rapidly write and implement custom rules to defeat new fraud tactics.”

So if you don’t know what your fraud rules are costing you, let us help. Sign up for a free 15-minute fraud analysis and learn more information about how Kount’s rules engine works by visiting our technology overview page. A few rules can go a long way in improving your bottom line.