How E-Commerce Companies Choose the Right Fraud Detection Platform

When it comes to E-commerce fraud, there’s no such thing as a victimless crime. A new report has shown that for every dollar stolen by fraudsters, organizations across industries spend roughly $3.36 on chargebacks, losses, merchandise replacements, fees, and interest — an increase from $3.13 in 2019. What’s more, a recent LexisNexis report noted that these costs are usually higher for merchants that deal primarily on digital channels. The report also noted that the total cost of fraud losses make up about 1.90% of annual revenue.

When fraud losses are too high, many E-commerce companies are forced to pass on some of those costs to their customers in the form of higher-priced merchandise or fees. To say this is unfair to honest customers is an understatement, but it’s often the reality many merchants face if they want to continue doing business.

Is your organization effectively prepared to choose the right fraud detection tools that will mitigate losses? Here’s a closer look at the criteria that can help you defend your profits, customers, and reputation.

Understand Your Fraud Prevention Needs

When choosing a fraud detection tool, it’s helpful to work backward to better understand your needs. For starters, think about why you need new fraud tools in the first place: how is fraud occurring in your organization? How much is fraud costing you? Where do current methods fall short?

Once you know your needs and identify gaps that need to be filled, you can evaluate new solutions against these criteria.

Uncover the Hidden Costs of Fraud Detection and Their Impact on ROI

The upfront costs of a fraud detection platform aren’t the only costs to consider.  

Calculating the total cost of ownership can help organizations better understand the ROI of a solution. Things like ongoing maintenance, licensing, and employee onboarding should be factored into the decision. In addition, consider the time it takes for a platform to start delivering value.

Identify the Necessary Resources

A fraud platform’s effectiveness depends on a successful deployment. This shouldn’t be treated as an afterthought, but rather as a key part of the decision-making process. 

Both on-premise and cloud-based deployments will require certain resources. Organizations must be prepared to meet the infrastructure and personnel requirements and include these items in their cost estimates and deployment timelines.

For example, physical hardware, training time, licensing, ongoing maintenance, and fraud teams may all play a role in choosing a fraud platform.

Explore the Right Features to Achieve the Desired Results

It’s important to consider not only what your fraud detection features do, but also how they function. Understand how your fraud platform can protect against unknown and evolving threats over time. Also, take into account the response time from your team to make decisions when fraud is detected. Taking too long could create friction for good customers, while not reacting fast enough could allow some fraudulent activities to slip through the cracks.

Implementing fraud detection is not optional in today’s increasingly digital shopping environment. The problem, however, is that rapidly changing technology allows fraud to evolve faster than many of the tools designed to stop it.

Download our new ebook, Essential Guide for Using Machine Learning for Fraud Management to learn how E-commerce companies can choose the right fraud detection platform.