Nature is often associated with the survival of the fittest, but we often forget about the need to take calculated risks to survive, especially if we aren’t the fittest around. Similar to this, the world of e-commerce requires us to take necessary risks in order to survive. Merchants have become increasingly aware of the need for fraud protection services and have often either opted for in-house verification tools or outsourced to deploy third party fraud solutions. However, most solution providers, especially mass market solutions, are risk-averse, and often opt for verification tools that are focused on detecting threats. While these solutions may have had some successes in fighting fraud, many merchants and solution providers fail to realize that in their attempt to fight fraud, their online sales had inadvertently taken a hit as well. Merchants are also prevented from attaining their full business potential. Here are some reasons why risk-averse solutions are detrimental for merchants, especially in the long run:

  • High rejection rates
    • Genuine transactions that fall on the borderline score in fraud tests are often rejected, because these fraud solutions are unwilling to take risks and would rather reject these transactions
  • Reduced potential to expand overseas
    • Because of the risk-averse nature of these fraud solutions, expansion of the business across borders continues to be seen as a risky venture and the fraud solutions are not well equipped to deal with cross-border sales
  • Unnecessary buying restrictions
    • Many fraud solutions make merchants impose unnecessary buying limits, such as amount based limits where customers are unable to make purchases above a certain amount. This becomes an issue when VIP or high spending customers wish to make higher purchases but are unable to, and these verified clients are not monetized as they should have been

What can you do?

Fighting fraud should not come at the price of sacrificed revenue and lost sales. Online fraud is part of online sales. If merchants are experiencing zero fraud, the chances are they are losing sales at the same time. (If you don’t believe, just take a look at your rejection rates and think about all the sales you have lost!) To get the best out of the fight against fraud, merchants (and solution providers) need to shift from a risk-averse, threat-detection policy to a strategy that focuses on business growth while risks are well managed.

Back to our photo, the crocodile is one of the most fearful predators, but the raccoon has taken the risk to ride the crocodile across the river. The message is clear: if you are always afraid to take risks, you will never get to reap the benefits. The same logic applies in our fight against fraud; we have to take some risk to get more out of our fight against fraud.

What CashShield can do for you

CashShield’s unique Optimized Fraud Risk Management Algorithm is designed for optimization, which means that we consider all orders as a portfolio and focus on the positive elements from each transaction. This is different from risk-averse approaches as we are able to manage each risk decision carefully and pass genuine borderline transactions. Merchants can therefore get much greater acceptance rates and revenue boost from optimization. CashShield can help you eliminate fraud without compensating business potential.