How Do Merchants Get Paid In CNP?
While a fraud manager's primary goal may be fraud prevention that is not the only goal for the business who strives to increase revenue, reduce costs and minimize losses. These goals can be in direct conflict, and as a fraud manager your job is to balance these goals to ensure maximum profitability.
DID YOU KNOW
While a fraud manager's primary goal may be fraud prevention that is not the only goal for the business who strives to increase revenue, reduce costs and minimize losses. These goals can be in direct conflict, and as a fraud manager your job is to balance these goals to ensure maximum profitability.
How do you begin to understand card-not-present fraud and the mechanics behind it? You start with the card-not-present payment process. This gives you a good basic understanding of the touch points in an order, and the people and organizations that facilitate those touch points. Through this you see how the fraudster can manipulate these people and business processes to their advantage.
In the Payment portion of the site we discuss these organizations, departments and roles involved in the payment process. We also cover the steps the money goes through to get to your business and finally we start our discussion on charge-backs and your liability as a merchant.
Don’t short-change yourself on understanding this process. Too often I see that fraudsters understand the business processes around payment better than the merchant does — and you can’t afford that.
You don’t have to be an expert in credit card payment, but you had better understand the basics, or you will struggle in developing an effective strategy. How will you know where the best points are to implement fraud-prevention techniques if you don’t understand the payment process? How will you know how to balance your fraud-prevention goals with the sales and administration goals if you don’t understand the impact of your strategies on the payment process?
You will also find you need to understand the payment process because you and your staff will naturally gravitate to what they know best. I point this out because if you are like most merchants out there, you probably don’t come from a law enforcement background. Depending on your background and the background of your team, you will find certain topics in developing your new fraud-prevention strategy more difficult than others
Think about the background of you and others on your team. If they came from the website development or content teams, they will understand the buy page and shopping cart. If they came from the credit or finance side, they will understand the money flow, but not how the order gets placed or filled. If they came from the call center, they will understand the order page, but not where it goes from there. You, as the fraud practitioner, are responsible for making sure everyone on the team understands how fraud touches all of these points. You are also the one that has to create a seamless fraud-prevention business process that spans all these departments.
Remember, although your primary goal is fraud prevention and reduction, that is not every department’s goal. Envision three major goals in a business: increase revenue, lower costs and reduce losses. These goals can be in direct conflict, and your job is really to balance these goals to ensure maximum “profitability” to the company.
A good way to understand this is to look at it from a sales, finance and operations perspective. Your Finance Department is going to be focused on profitability, and profitability means looking at how much the business is losing, how much they are spending to manage the processes today, and what the impact is on revenue. In working with your Finance Department, you have to be prepared to explain the impact of any changes in terms of profitability.
Your Operations and Customer Service Departments will be focused on managing administration costs. In working with them you can expect to get questions about associated head counts. Does your new strategy reduce the need for people? Does it increase the head count? Does it add any costs to completing sales, such as transaction costs?
Your Sales Department will be focused on sales conversion, making sure they can get every possible sale they can. Those fraudulent orders still represent sales to them, so they are very leery of anything that might kill a potential sale. You will have to show the sales force that your efforts are not barriers to sales and are not “insulting” good customers.
For all of these departments, fraud is not their primary goal, so you have to be the champion to get them to feel the pain and to help in finding the right solution to stop fraud.