There’s an axiom in the CNP fraud prevention world: It’s easy to completely eliminate your fraud; just don’t take any orders. The line is tongue-in-cheek, but card-not-present merchants increasingly are more concerned with declining legitimate orders than they are with preventing fraudulent orders. According to Portland, Ore.-based payments and antifraud technology provider Vesta, these merchants have good reason to have shifted their perspective. Nearly one-third of all transactions declined due to suspected fraud are legitimate, the company found in recent research. These “false positives” (named such because a fraud-prevention system has incorrectly flagged them positively as fraud) not only result in a lost sale, but can also send a loyal customer to a competitor—perhaps never to return.
“A merchant’s default position, once they feel like they are being targeted by fraudsters—and it’s human nature—is to tighten their fraud filters all the way down. But, you’re hurt if you do and hurt if you don’t,” Tom Byrnes, CMO at Vesta, told CardNotPresent.com. “How do consumers react to this? Did you just lose that transaction or did you lose a customer?”
Byrnes said an emphasis on controlling false positives can add to a business’s operational costs—especially if it offers digital goods.
“The problem is, you’re dealing with instant, sub-second decisioning and fulfillment. Once you decision, you’re fulfilling,” he noted. “That adds a different dimension to the operational landscape for a merchant’s fraud shop. Now you have to add different kinds of technologies—device fingerprinting or out-of-band authentication, for example. But, that’s adding layers and merchants have to decide if they are going to invest in those things.”
To educate merchants about ways to identify and prevent false positives, Vesta has published a free e-book detailing the challenges and how to overcome them.
- Increasing Revenue by Reducing Declines