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Online Retail Sites: Balancing Efficiency & Fraud Prevention

Online Retail Sites: Balancing Efficiency & Fraud Prevention

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Published by iovation
Online retail sites are becoming a prime destination for shoppers, contributing to the industry’s double-digit growth
rate. The success of retail sites in luring more cyber shoppers is creating an operational challenge -- handling
growing incoming orders without increasing operational costs, sacrificing profit margins or eroding customer satisfaction.
Online retail sites are becoming a prime destination for shoppers, contributing to the industry’s double-digit growth
rate. The success of retail sites in luring more cyber shoppers is creating an operational challenge -- handling
growing incoming orders without increasing operational costs, sacrificing profit margins or eroding customer satisfaction.

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Categories:Types, Research
Published by: iovation on Apr 03, 2009
Copyright:Attribution Non-commercial

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06/16/2009

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Cost of reviewsShipment delaysLoss of scalabilityLoss of merchandiseChargebacksPresentment costsLost sales revenueCustomer loss to competition
Manual ReviewValid order rejection Confirmed fraud
Online Retail Sites:
Balancing Efciency& Fraud Prevention
Online retail sites are becoming a prime destination for shoppers, contributing to the industry’s double-digit growthrate. The success of retail sites in luring more cyber shoppers is creating an operational challenge -- handling
growing incoming orders without increasing operational costs, sacricing prot margins or eroding customer 
satisfaction.
While conrmed fraud is a relatively small percentage of the overall online orders, its negative impact on protsand operational efciency extends far beyond the loss of merchandise directly linked to fraud. In 2006, merchantsmanually reviewed nearly a quarter of all orders. Many merchants accepted up to 90% or more of the orders theymanually reviewed
1
, demonstrating that existing screening tools are not sufciently accurate. They trap too manygood orders and customers ultimately resulting in costly reviews, customer dissatisfaction and lost revenue.Whether measured in operational inefciency, dollars lost to conrmed fraud, or good orders rejected due to falsesuspicion of fraud, the impact of fraud on the ability to maximize sales and protability cannot be under estimated.
Cumulative impact of online fraud on protability:
The share of incoming orders merchants declined to accept due to suspicion of payment fraud continued to rise to
4.1% of orders in 2006. If only 20% of these turned out to be valid, then as much as another $1.6 billion may havebeen lost—most likely to competitors.- Cybersource survey report, 2007
How iovation ReputationManager
works
Nothing beats fraud like iovation
 
1. Cybersource Fraud Survey, 2007
 
Benets
 
Increase
order acceptance
Increase operationalefciencyPrevent fraudReduces manual reviews & increases sales
to fraud ratio
Expands operational capacity
Protects brand reputation
Exposes fraudsters without impacting good
members
Helps reduce order to shipment time
 
Reduces payment/chargeback & shipping
fraud
Shuts down the revolving door of fraudsters
Enables geographic risk assessment
Can share reputation of known fraudsters
among retail sites and beyond
How iovation ReputationManager
works
The table below highlights the benets cited most often by existing iovation customers:iovation ReputationManager 
TM
is a proven fraud management solution that lets online merchants control riskwithout sacricing operational efciency, scalability, or prot margins. iovation focuses on the fraudsters’ deviceas the nexus of their activities and exposes them by accurately identifying their device across retail sites andbeyond. When fraud is detected against a device or account on a site, all associated devices and accounts onthat site can be quickly exposed and agged in real time to prevent repeat offenders from hiding behind multipleidentities and devices. The information can be shared with other subscribing sites for pro-active protectionagainst known fraudsters.
Solution: iovation ReputationManager 
Fraudsters are typically repeat offenders and target multiple sites. Once detected, they return using a different
or synthetic identity. The online retail industry needs a solution that is accurate and can pro-actively shut downknown fraudsters so they can’t hide behind changing identities and cause harm even when they are visiting a sitefor the rst time.

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