Balancing fraud management and the customer experience

Finding the middle ground between customer protections from fraud and the inconvenience that can be caused by those protections is a delicate balancing act that can have bottom-line and reputational impacts if not handled with care.

What exactly does this balancing act look like in practice? Let’s take transaction risk scoring as an example. Transactions are often scored by a centralized fraud decision engine, which allows lower-risk items to pass through and flags medium- or higher-risk items for further authentication and/or manual review by the fraud team. Imagine a scenario in which a customer attempts to make a legitimate purchase, such as a new TV. This legitimate purchase is inaccurately flagged as high risk for fraud, and the customer receives a text asking if it’s really them attempting the transaction. The customer responds yes and may then attempt the transaction a second time. Most customers will be comfortable with this initial barrier, but what if the transaction gets flagged again? This sometimes happens if the scoring engine doesn’t integrate that real-time feedback swiftly enough to ensure that the same transaction isn’t flagged a second time. It can also happen if fraud model thresholds are set too tightly, resulting in a high rate of legitimate transactions inaccurately flagged as fraud. Either way, we’ve now bothered a good customer twice for a single transaction. What started out as a customer protection has turned into a customer inconvenience.