Manual Fraud Reviews: Top Strategies to Improve Your Processes

With e-commerce becoming increasingly technology-driven, it might seem surprising that many e-commerce merchants still rely almost exclusively on in-house analysts to manually review up to 30% of their transactions to prevent fraud and false declines – despite the fact that manual reviews can be time-consuming and resource-intensive.

If this sounds like your business, here are four strategies to improve the efficiency and efficacy of your manual review process.

1. Refine Your Fraud Filters

When e-commerce merchants want easy strategies to stop fraudulent orders and flag questionable orders, fraud filters are a popular solution. But they aren’t foolproof.

For example, if you set up a fraud filter to automatically decline transactions where the billing and shipping addresses don’t match, you could potentially turn down an order that someone is buying as a gift for a family member.

When set up correctly, fraud filters can be incredibly helpful at reducing the risk of fraud. But it’s important to be mindful of the fact that fraud filters – when not implemented correctly or effectively – can severely limit your earning potential.

To help you catch more instances of sophisticated fraud, you can consider layering your fraud filter rules. But be careful: If the rules are ordered incorrectly, it can unintentionally cause some rules to be overruled by others.

When layering is done right, fraud filters can use the common characteristics of fraud — considering things like location, delivery address, and shipping speed — to identify and prevent fraud.

2. Develop Fraud Scores

To make more accurate fraud decisions — and to do them quickly — merchants should integrate statistical algorithms that help reviewers analyze an enormous range of factors surrounding every incoming order and assign a fraud score to each order.

Fraud scores use predictive techniques to capture patterns of fraudulent activity, based on information about a transaction (like IP address, AVS result, shipment method, billing/shipping addresses and type of email address). Some services may also look at velocity issues, address and phone number verification, and other factors — even comparing all the data against previously evaluated orders. The service scans the data, looking for unusual or potentially fraudulent entries, and then turns patterns into a numeric value that indicates the probability that a transaction may be fraudulent.

At the end of the evaluation, the service returns a score, which e-commerce merchants can use to approve, reject or further review orders. The more accurate the fraud score is, the better a merchant will be at correctly approving or declining transactions.

3. Track the Fraud Score Metric

Every merchant should be tracking this important fraud KPI by taking the number of transactions that are manually reviewed for fraud, dividing it by the total number of orders, and expressing it as a percentage.

You want to find a balance that fits your business. A high rate of manual reviews might mean you’re spending too much time, money, and resources on reviewing individual orders. But if your manual review rate is too low, your automated processes might be inadvertently declining legitimate orders.

4. Outsource Your Fraud Prevention

As fraudsters get better at beating basic fraud-screening procedures, you may feel like you have to make a choice in your fraud prevention approach. Either you risk losing good customers by automatically declining more orders, or you risk slowing down fulfillment by manually reviewing more orders.

Luckily, those aren’t your only options. You can also outsource manual reviews to a third-party fraud prevention service. The expense can be well worth the savings in staff time, lost sales, and fraud costs.

At ClearSale, we combine the best of both worlds, using a highly trained team of fraud specialists to manually review suspicious transactions and complementing this team with a proprietary machine learning platform and fraud rules that are customized to your business.

To learn more about whether a fraud managed services solution like ClearSale’s is right for your business, download our free e-book, “Is a Fraud Managed Services Solution Right for your Business?”

Are you declining good orders?