Today, we just got done analyzing the confirmed fraud addresses from the United States Postal Inspection Service, which is the law enforcement agency of the Post Office. We went back and looked at all the confirmed fraud addresses over the past 12 months. In doing so, we categorized all of the records into the category of fraud.
What we found was that 48% of the confirmed frauds were due to re-shipping schemes and that 41% of the confirmed frauds were due to a fraudulent change of address. Together - they represent 89% of all confirmed frauds.
What is interesting is that for both of these cases, any ID Verification service would have very likely indicated that the Name Matched the Address! For fraudulent address changes - the fraud artist changed the address from the victim's address to an alternate address. This would then be picked up by the third party verification providers as a confirmed address change. In the second situation - unsuspecting "mules" would receive merchandise that was being shipped to the actual person listed at the address.
Point is - in both cases, any traditional ID Verification service would confirm that the name and address matched! Over the past few years - a culture has developed that when we "match" the name to address that it must be "good". This matching would be considered sufficient or "reasonable" to any examiner as meeting USA Patriot Act, Bank Secrecy Act or Fact Act guidelines. As we can see above - it isn't that simple. Makes you wonder?
Wednesday, November 19, 2008
Tuesday, November 18, 2008
Where Do You Go Fishing?
Today, I spent spent an hour with a prospect discussing the merits of utilizing a score to help them prioritize their online orders that they were reviewing. In preparation - we showed how by using a score - we could identify the 10% of riskiest orders that had a 38% fraud rate and the least risky 10% of orders only had a 2% fraud rate. They mentioned that the score wouldn't help, as they would still have to review all orders.
I asked if knowing that 38% of the orders were fraud in one segment and only 2% in the least risky segment would allow their fraud investigators to be more efficient in their investigation. The answer was a resounding "No".
Unfortunately - this is not a too uncommon response. In the financial services industry, most have become accustomed to scoring to make decisions. However - in other verticals such as e-commerce, the notion of scoring is an all too unfamiliar thought. When pressed on why this knowledge wouldn't help, the response was that it was because their fraud teams had better intuition and "gut" feel.
After the call, I couldn;t help come up with an analogy - related to fishing. I asked a colleague the simple question: "If you were out fishing for walleyes (I'm from Minnesota) and had to decide which spot to go fishing. The first spot was 15 feet deep and the fish finder indicated it was loaded with big fish. The second spot was 80 feet deep and the fish finder indicated there were no walleyes present (every good Minnesotan knows that walleyes aren't in 80 feet of water).
So which spot would you choose? Of course - I think most, and certainly most Minnesotans would quickly ascertain that the first spot would be much more likely to be successful.
This is same thing as scoring. It's all about finding the best fishing spots and avoiding those where success is minimal at best. In doing so, you can have a much more enjoyable day at the lake. Had to throw in that last one, as the snow is starting to fly and I am still holding on to my summer memories.
I asked if knowing that 38% of the orders were fraud in one segment and only 2% in the least risky segment would allow their fraud investigators to be more efficient in their investigation. The answer was a resounding "No".
Unfortunately - this is not a too uncommon response. In the financial services industry, most have become accustomed to scoring to make decisions. However - in other verticals such as e-commerce, the notion of scoring is an all too unfamiliar thought. When pressed on why this knowledge wouldn't help, the response was that it was because their fraud teams had better intuition and "gut" feel.
After the call, I couldn;t help come up with an analogy - related to fishing. I asked a colleague the simple question: "If you were out fishing for walleyes (I'm from Minnesota) and had to decide which spot to go fishing. The first spot was 15 feet deep and the fish finder indicated it was loaded with big fish. The second spot was 80 feet deep and the fish finder indicated there were no walleyes present (every good Minnesotan knows that walleyes aren't in 80 feet of water).
So which spot would you choose? Of course - I think most, and certainly most Minnesotans would quickly ascertain that the first spot would be much more likely to be successful.
This is same thing as scoring. It's all about finding the best fishing spots and avoiding those where success is minimal at best. In doing so, you can have a much more enjoyable day at the lake. Had to throw in that last one, as the snow is starting to fly and I am still holding on to my summer memories.
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