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Avoiding those unnecessary false declines: 4 tips for choosing an effective fraud management solution

27th February 2018 Print

Here's a practical tip for ecommerce companies: avoid losses from chargebacks by blocking fraudulent orders. Practical, yes, but not very useful. Fraud in ecommerce has become a major problem for online merchants, mainly because a single chargeback can inflict losses much higher than the value of the fraudulent order: merchandise replacement, chargeback penalties, and resources spent disputing the chargeback give etailers like you plenty of motivation to prevent accepting transactions from fraudsters.

Yet motivation is not enough. You can enthusiastically resort to excessively strict fraud filters…and still lose plenty of revenue by falsely declining legitimate orders. This is why newer best-of-breed ecommerce fraud protection solutions leverage technologies like machine learning and device fingerprinting to collect more data and analyze it much more thouroughly than previous, simpler approaches. 

Mabye you're using one of these outdated approaches, or even no fraud prevention system at all. Either way, we've compiled this list of tips to help you find a robust fraud management solution.

Tip #1: Find a solution that can improve your safe approval rates

One of the key benefits of newer fraud prevention methods is that their more sophisticated analysis allows them to accurately weigh each individual data point: match or mismatch of shipping and billing addresses, the age of the email address supplied, number of items in the cart, etc. Basically, it allows them to more accurately discern if a real shopper or fraudster is behind the order. This makes a big difference when it comes to reviewing orders which would be declined automatically by your current solution or manually by your in-house tool or process. By safely approving these "risky" orders, cutting-edge fraud prevention solutions can recoup revenue which would otherwise have been lost due to false declines. 

After all, isn't the goal to accept more good orders?

Tip #2: Look for solutions which produce a clear-cut accept/decline decision

This is preferrable to tools which assign risk scores to orders. In effect, that only performs half the job, because you as a company have to decide what numerical threshold is too risky for you. Also, that magic number will need ongoing review and tweaking as you try to optimize the balance between false declines and chargebacks.

Tip #3: Ask potential providers if they offer a chargeback guarantee

Many fraud prevention vendors now provide a chargeback guarantee, which is a promise to reimburse you if an order they approve later results in a chargeback because of fraud. Not only does this protect you, it's also a indicator of how confident the vendor is in their own results, because they'll literally pay for it if their performance doesn't match their sales pitch.

Tip #4: Find out what (if any) additional friction this will create for your customers

A number of key things to learn when evaluating any solution is whether it requires any extra steps or info to be entered by shoppers. Let’s not forget that typing in additional info can be really challenging on mobile for some.  Do you really want to increase the change of cart abandonment? Not likely. 

Your goal for customer experience should be close to Amazon's 1-click ordering option

Remember that saving time and effort is one of the key reasons why consumers shop online in the first place. The ideal fraud prevention solution would be completely transparent to the customer.

Although your search should include many other criteria (including those unique to your company's market and growth plans), these four tips will get you off to good start. By finding the fraud prevention solution that meets your needs, you will better protect your revenue and growth from the twin threats of chargebacks and false declines.