Loss of revenue due to Fraud has been staggering in the last few years. mCommerce and international merchants are approaching losses equal to 2% of profits.
Merchants have 4 choices when deciding on how to fight fraud: manual, automated, outsource to 3rd parties, or find a merchant processor that offers fraud protection.
- Option 1 – Manual
Manually review transactions for potential fraud. This option takes a lot of resources which for any business is hard to allocate. Those that decide to proceed, quickly discover that error rate is very high. Technologically savvy criminals know how to disguise fraud to even the most trained eye. So when a business is trying to concentrate on surviving and growing, the constant uphill battle of manually fighting fraud proves too much.
- Option 2 – Automate
Automated software is available off the shelf or some larger merchants try to develop the algorithms themselves. This system tends to catch legitimate transactions as fraud (aka false positives). This leads to combining the two systems: first catching transactions as possible fraud, then manually reviewing. Unfortunately, this doubles the cost. First you spend money on software, then you have to pay someone to manually review transactions.
- Option 3 – Outsource
Depending on the company you choose, this can be the best or turn to be the most expensive option for fraud detection. If your processing company doesn’t offer fraud detection services, outsourcing to companies like Chargebacks911, Ethoca or others can be the most effective choice. Make sure you read the fine print and look at all the line item costs.
- Option 4 – Processor fraud systems
Last but not least: talk to the processing company you are processing with, or about to start working with about their fraud systems. Sometimes merchants have to pay extra but since merchant credit card providers offer it as an extra services the cost should be much lower than anything else on the market.
Remember that revenue loss for fraud doesn’t stand on its own. Allowing fraudulent transactions through your business will inevitably lead to Chargebacks, and Card companies love shut down businesses with high Chargeback ratios. Which means fraud has a compounding effect, not just its direct cost.
Contact AllRates for a ROI analysis on how to mitigate fraud and what are best solutions for your business.