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May 15, 2017

Monitor your e-commerce service's fraud performance in terms of acceptance, rejection, reviews and errors

Monitor your e-commerce service's fraud performance in terms of acceptance, rejection, reviews and errors

If the e-commerce service is exposed to payment fraud, it likely has a fraud prevention system with some rules and scoring in place. In that case, the KPIs are straightforward.

Monitor acceptance, rejection, and reviews

First, the merchant needs to know how many payments the fraud prevention system:

  1. accepts automatically;
  2. sends for manual verification (if any); and
  3. rejects.

Monitor false negatives

Second, because the fraud prevention process makes errors, the e-commerce service needs to know how many instances of fraud were considered ok by:

  1. the rules,
  2. the risk score, and
  3. the risk operation analysts.

These errors are called false negatives (or type II); they need to be minimized.

Monitor false postives

Third, with A/B testing, e-commerce services may estimate how many true transactions the rules, scores, and reviewers are rejecting. These are false positives errors (or type I).

To measure the fraud detection outcomes and errors

# KPIs Proportion of payments
1 Auto-accept Automatically accepted by the fraud system.
2 Manual review Sent for manual verification.
3 Reject Automatically rejected by the fraud system.
4 False positives True clients suspected of fraud.
5 False negatives True frauds that the detection has failed to detect.

References