Before you flag anyone for fraudulent activity, you need to acknowledge the possibility of false positives. Activities that seem fraudulent might not actually be fraudulent. For example, a person who possesses multiple payment accounts and travels a lot may actually be a wholesaler dependent on your service. Multiple people who use the same payment account might be related to each other. Frequent requests for refunds might be because of operational issues from your vendors. Therefore, as much as it is important to be on the safe side, it is very important to invest proper amount of time in investigating the true nature of these activities that have been tagged as suspicious.
It would be ideal to create a dedicated team or a committee for this purpose comprising of individuals with experience in dealing with financial transactions. This team needs to analyze all your transactions on a daily basis and share daily reports. You can call this team the fraud management team.
If your team notices suspicious transactions by users, you can temporarily suspend the user’s account and contact the user via any channel for their justification. Post the temporary suspension, you need to work with your team and resolve this issue with the suspected users as quickly and as respectfully as possible (ideally within 24-48 hours). You could also ask them for a valid proof of identification.
If not for fraud prevention, these interactions could also be opportunities to understand your customers in case there are any issues that are imminent in your operational value chain and your website.
The next steps
The tools, tips and techniques outlined in this series will help your business proactively avoid fraud. However, if your company has a complex business model or is scaling up, then evaluating the vast volume of transactions for potential fraud becomes a very cumbersome task that small or medium-sized teams will not be able to perform.
Therefore, significant investments are required to make your fraud management efficient from a technical perspective as well as HR perspective. You need to evolve from a fraud management team to a fraud management system.
If you want to directly go to part 3, which talks about the investments required for a robust payment fraud management system, you can access it here.