The first application.
A travel agent
I once worked for a major online travel agent that sold two billion euros of airline tickets per year. The company had seen payment fraud spin out of control, and for several months it focused on reducing it by strengthening fraud prevention rules. Also, the company had just put together a team to configure the fraud prevention system, verify payments, and manage chargebacks.
It lacked the necessary software
So the problem wasn’t a lack of security or resources. The problem was also not a lack of reports or payment verifications. The problem was that the fraud prevention system had a poor design, reviewers had no decision support system, and data analyses lacked method and scale. They lacked the necessary software to manage risk.
Peak season for selling tickets
When I joined the company, it was the peak season for selling airline tickets for summer travel. The VP of payments asked me to reduce the daily number of payment verifications. As the risk operation analysts could not review all the payments, part of the workload was absorbed by the customer service team.
A methodical process
Ten days upon arrival, I'd retrieved a dataset of several million transactions from the payment provider, matched those with the fraud history, and identified several ineffective rules—eliminating these reduced the workload.
It was not a one-off chance achievement but the seed result of a methodical process, which I describe in this book. Over the next four months, I developed automation, back tested, audited, and proposed changes, which allowed the company to halve the number of clients who were automatically rejected by the fraud prevention system while maintaining its payment fraud exposure. These changes saved the company tenths of millions of euros in revenue opportunities.
Risk management intelligence
These bottom-line impacting results show that simply having a dedicated fraud prevention system is not enough, even with a team of statistical and risk operation analysts.
In addition it is also necessary to have a software for risk management intelligence. It's not an additional operational cost. Instead, it’s an investment that brings revenue to the company and benefits to the buyers.