May 31, 2018
The size, structure, technology and measurement of fraud departments vary widely across the e-commerce industry, and many times that’s because a lack of visibility is an unfortunate byproduct of companies’ unwillingness to talk publicly about fraud. Card Not Present’s first annual Fraud Operations Study, sponsored by RISK IDENT, is an attempt to define benchmarks in these areas for fraud professionals who too often have to operate with few established industry standards.
Fraud teams are small, the study found, and remain so even when companies grow. When asked how many people comprised their teams, the most common overall answer was 2-3. That answer remained the most common among small (less than $50 million in revenue), midsize ($50 million-$99 million and $100 million-$199 million) and even larger ($200 million to $499 and $500 million – $1 billion) companies. Only the very largest enterprises (annual revenue in excess of $1 billion) had large fraud teams.
How companies measure the effectiveness of their fraud teams was one area of the study that showed consistency across the industry, but it is what many are not measuring that may be hampering their efforts. Unsurprisingly, chargeback rate is the key performance indicator (KPI) used by the most companies (74 percent). More than half track the percentage of approved orders that result in fraud chargebacks. Less than 30 percent of companies, however, track false positives as a KPI and 42 percent said they did not know their false positive rate.
“Because fraud professionals have very little visibility into how their peers conduct their fraud prevention operations, they have relatively little insight beyond their own instincts and results guiding their efforts. Industry-wide benchmarks are rare,” said D.J. Murphy, editor-in-chief of Card Not Present. “With support from RISK IDENT, this survey will be an annual research effort endeavoring to provide that information. What do fraud teams measure and how do they define success? To whom do they report in the organizational structure? To whom and how do they assign manual reviews? What tools are most effective and how do they evaluate them? The answers to these questions can help fraud professionals in what is often a challenging effort to preserve revenue for their companies.”
Murphy will conduct a webinar today at 1:00 PM ET unveiling more results from the inaugural survey. Everyone who registers will receive an advance copy of the full survey report.