Employing every single fraud prevention tool available isn’t feasible, nor is it necessary. When evaluating chargeback prevention solutions, you should be aware of the types of solutions available and employ each as needed. In the end, you must evaluate the cost of fraud prevention against the benefits. It’s easy to fall into the trap of “turning on” all fraud prevention measures to ensure that nothing seeps through the cracks; however, there is such a thing as being too aggressive.
You don’t want a 0.00 percent chargeback ratio if you are turning away 10 percent of your good customers in the process. You need to strike a balance between what you turn away and what you accept as valid.
The question you need to ask is where your chargeback data is coming from because there are types of fraud-scoring tools that are too sensitive. The overly sensitive fraud scoring tools result in an unnecessary amount of false positives, causing card declines for legitimate purchases. In fact, there can be as many as 40 false positives for every authentic attempt at fraud. This means up to 97 percent of transactions flagged as high-risk can be legitimate transactions*. These false positives trigger manual reviews, which are expensive and time consuming. They also result in card declines, blocked accounts, and an overall poor customer experience—all of which open up a greater potential for lost sales and other costs related to chargeback management.
The fact is that there is no one “silver bullet” to protect you from fraud; however, finding the right balance and maintaining a flexible and responsible fraud prevention strategy that is efficient and accurate will help you be successful. By layering fraud prevention tools and toggling to find what is “just right” for your business you can reduce chargebacks and boost your profits.
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Rick Lynch is Senior Vice President, Business Development, at Verifi.