How to Adapt Your Fraud Policy for a New Product Release

Releasing a new product can be risky. Merchants don’t know if it will be popular with customers, and they certainly don’t know if it will be popular with fraudsters. But that doesn’t mean e-commerce merchants should just launch their product, hope for the best, and react to fraud only if and when it comes.

Instead, e-commerce merchants should work with their fraud prevention vendor to modify their fraud strategy before the release, evaluating any potential risk and preparing to give extra attention to orders. Because any new product represents an opportunity for fraudulent attacks, here’s what you must do to be prepared.

The Product Details a Fraud Team Must Know

Before a business can launch a new product, there’s a lot of work to do — and not always a lot of time in which to do it. Unfortunately, sometimes the rushed timeframe means businesses put off fraud prevention initiatives. And that can be a critical — and costly — mistake.

Instead, businesses must keep their fraud prevention team in the loop throughout the entire development process, allowing the team a comprehensive view of the product and its potential risks. Here are some of the most common questions a fraud prevention vendor will ask about a product when determining fraud risk.

  • Is it a well-known, popular brand?
  • Who’s the target market?
  • What’s the average ticket price?
  • Is it in high demand?
  • Are there similar products already on the market?
  • Is the product relatively small and easy to store?
  • How fragile is the product?
  • Are there multiple SKU numbers (colors, sizes, etc.) for the product?

The fraud team then combines each piece of information to assess risk. For example, a high price tag makes a product more attractive to fraudsters, elevating the fraud risk. But if that expensive product is also large and bulky (making it harder for fraudsters to store) and isn’t popular on the resale market, the overall fraud risk decreases.

Getting Help From the Competition

When fraud prevention teams are analyzing risk patterns, they frequently turn to data on a product’s historical consumer base and purchase patterns. So how can fraud teams compensate for that lack of data when it comes to a new product launch?

Fraud prevention teams may consider looking at e-commerce merchants selling similar products for insight on how they’re managing and evaluating fraud. Fraud teams may be able to gather important information from competitors on the number and proportion of declined transactions and chargebacks; then again, a competitor might neither have this information themselves or be willing to share it.

But even if an e-commerce merchant does glean fraud data from the competition, this is no guarantee the new product will carry the same risk.

Is Relaxing or Tightening Fraud Rules the Right Answer?

When a merchant is launching a new product, it’s hard to know whether they should relax or tighten their fraud rules. On the one hand, relaxing the rules may help boost sales; after all, fraudsters might not be initially targeting the new product. On the other hand, because the team doesn’t yet know what the true risk will be, they may err on the side of caution and strengthen the fraud rules.

The key to success here is flexibility. When e-commerce merchants launch a new product with no historical fraud data, a good fraud prevention vendor should start monitoring it closely without immediately auto-declining transactions. (If they do, the algorithm will only continue to get more conservative and decline more and more future orders.) Instead, the vendor should take the time to gather transaction data, study the potential risk and modify their strategy based on the information that comes in.

Is a Fraud Managed Services Solution Right for Your Business?

At ClearSale, we use a combination of expert human analysis and robust artificial intelligence to assess the risk of a product and make instant adjustments to a merchant’s solution based on real-time data. Download our free e-book, “Is a Fraud Managed Services Solution Right for Your Business,” today to learn why a managed services solution like ours is a smart choice for your growing business.