Think about this: If you reduced manual review by 50%, how much would your company save? And how much more would you sell?
The most expensive aspect of fraud prevention – manual review – continues in a seemingly unstoppable upward trend. It’s a time-consuming process, which adds a cost without return and has a severe impact on customer experience.
According to research by CyberSource, nearly one-in-four orders are manually reviewed. The study also found that merchants reported accepting 82% of orders after the review, which indicates that more orders are being reviewed than is strictly necessary.
But this could be prevented with more intelligence earlier in the fraud prevention review process.
So, it follows that reducing the volume of manual review can save money and rapidly approve legitimate transactions.
Anatomy of manual review
As the name implies, manual review is performed by a team of actual people, not an automated fraud prevention tool, and incurs the cost of payroll, training, policies and procedures.
Typically, after a transaction is flagged by a risk engine, a minimum of 15 minutes are required for each manual review to be conducted. Since this process includes subjective judgement, your team must be well-trained to avoid unnecessary revenue loss.
Online fraud prevention measures that frustrate customers to the point of abandonment will cost you much more revenue than actual fraud. In 2015, false positives were reported to cost retailers a staggering $118 billion, while actual fraud cost was only $9 billion.
Every time a false positive occurs, you not only run the risk of losing a sale, but potentially a customer for life. Which brings a larger issue into play: striking the delicate balance between a prudent level of fraud prevention and low customer friction.
Consider that a poll conducted by CreditCards.com found that 4 out of 10 respondents in the US reported they had been contacted by their bank due to a blocked transaction suspected as fraud. More than half confirmed the blocked transaction was a false positive.
Research by Esteban Kolsky shows when customers aren’t satisfied, 13% of them will tell 15 or even more people about the negative experience. On the other hand, 72% will share a positive experience with only six people.
False positives shouldn’t be viewed as the price of better fraud prevention. The lifetime value of a loyal customer hangs in the balance.
A better way forward
As a best practice, an effective way to maximize revenue and reduce friction is to implement automated processes which flag high-risk transactions. Then, manual review can be utilized as a last line of defense against a smaller volume of high- or very-high risk transactions.
Analyzing post-manual review acceptance and rejection levels is also valuable in helping fraud teams tune their automated screening systems to make better use of manual review teams.
If you can trade the high cost of false positives for better fraud prevention results, why wouldn’t you? Purchasing a new fraud prevention product will quickly pay for itself by reducing overall costs associated with manual review.
Manual review is the most time-intensive part of the fraud prevention process. When a purchase is falsely declined, it creates a negative experience for your customer and can drive customers away from your brand forever.
So, a risk assessment strategy should give fraud prevention teams as much intelligence as possible to eliminate the need for manual review and approve more transactions.
Emailage Risk Assessment can help optimize the manual review process by enabling faster decisions. To find out how, click here.