The report is a mine of statistics on the extent and breakdown of online fraud. One of the key and unsurprising conclusions that can be drawn from these statistics is that fraud is too high, and that fraud screening technologies should be better employed. For example, 61% of merchants have a manual review element to their transaction process. Where this exists, even with the existence of the automated fraud screening system, more than one in five transactions are taken out of the system for that manual review.
This transaction element, the payment of physical staff to check individual transactions, is the most expensive part of the whole process. But 75% of the transactions they inspect are subsequently accepted. “To me,” commented Dr. Akif Khan, director of products and services at CyberSource, “that says that merchants should be tuning and optimizing their automated screening. You’re paying for heads to sit there and accept good orders when really the screening rules should be picking them up and passing them straight through anyway.” Improving the screening process would directly and effectively translate to higher profits for the business and better relations with the customer.
Another argument for improved screening is that despite the automated system, and despite the manual review, 1% of all accepted transactions still turns out to be bad. “This is an unacceptably high volume of bad transactions,” said Dr Khan, who, from his own experience believes that most of the bad transactions come from the automated part of the process. “Most merchants would want to see that 1% reduced to less than 0.5%.” He points to the television merchant who might have a 10% margin on each television sold. “If one of those is ‘stolen’, he needs to sell nine more simply to recover his own costs.” And for every 100 televisions sold, he is statistically certain to have at least one stolen.
The solution, says Dr Khan, is to employ an effective but optimised fraud screening technology.