Foundational steps for building a customized fraud strategy


A good Risk Management process can defend thousands of merchants and isolate fraud across millions of users. How do you get there? What questions should you ask? What data do you need? What processes can be built and how do you decide the correct path or tools to use?

These are huge questions that are imperative to answer. It’s my goal to impart the knowledge I’ve gained in building these processes so that you can efficiently and effectively build or fine tune a system unique to your business.

Here’s a quick breakdown that shows the way you can move through the beginning stages of building a new strategy. In my next articles, we will dissect the various aspects and try to answer some common questions around Risk Management.



This flowchart represents a high-level snapshot of the major questions asked to form a comprehensive fraud strategy. In building a strategy for a CNP e-commerce platform, start with chargebacks.

In my upcoming articles, we will dig deep into the following areas: How can you better understand your chargebacks? How can you resolve your chargebacks? How can you prevent them in the first place? How do you keep this process iterative and evolving over time?

Here you’ll find a brief summary addressing these questions, as well links to the articles that delve deeper.

How do you resolve chargebacks?
Start building that process out with some research. Initially, you won’t know much about the chargebacks your facing but you still want to respond to them. Utilizing chargeback response templates can help you get the ball rolling until you have a firm process in place.

Once you learn more about your specific chargebacks, you can circle back. Part of this iterative process is to build your chargeback response structure. Another key factor is to collect the right internal data to support your chargebacks. You should be sure to provide responses to chargebacks as soon as you start to receive them. Again, this must be an iterative process. Once you start answering chargebacks and collecting data, it’s time to step back and gain a deep understanding of your chargebacks.

What type of chargebacks does your company face?

Every company will experience a set of unique chargebacks. Understanding these will be the core foundation of your strategy.

You will need to learn whether and to what extent your chargebacks are service/product related versus friendly/malicious fraud.

Once you have firm knowledge of the chargebacks specific to your business, you must again circle back to improve your chargeback response process and move onto the next step: preventing chargebacks from occurring where possible.

How do you reduce the top driving factors for chargebacks? 

From answering what types of chargebacks you see by creating categories and subcategories, you can start to break out which categories can be reduced.

Product or service related chargebacks versus malicious or friendly fraud chargebacks require a different response unique to your business. This is where the real fun begins as you connect different company departments to tackle these issues.

For product or service related chargebacks, and friendly fraud, you will need to think user experience. Is customer support causing chargebacks? Do you add inaccurate data such as estimated delivery window, which causes product not received chargebacks to spike? Do good users submit chargebacks for fraudulent activity because they’re angry with their experience?

Fraudulent chargebacks, which are generally the of bulk of e-commerce chargebacks, require an entirely different and often more complex resolution.

To prevent malicious fraud chargebacks on your platform, you will need to start answering the following questions:

  1. Do I see malicious or friendly fraud?
  2. Should I outsource fraud fighting? How do I know which company to partner with?
  3. If I build in-house, what type of strategy and tools should I employ? How do I monitor the success?
  4. How do I gain company resources? How do I hire for manual review or chargebacks responders?
  5. How do I make this an iterative process and catch new trends?

In my next articles, we will dig into each of the questions listed as well as others to help guide you through the initial creation of your fraud strategy. Check out the Chargeback & Fraud Prevention Series Overview to see what articles to expect and link to those already available.

 

 

 

 

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