In-House Fraud Tools
To prevent fraud, some merchants use in-house fraud rules to detect risky transactions. These tools may rely on indicators like card verification value (CVV), address verification service (AVS), or average transaction value (ATV) to make decisions over whether to accept a transaction. Whilst many smaller merchants still manage fraud in-house, these tools are typically reliant on internal data and provide no visibility over customer behavior with other merchants, making them vulnerable to errors and more likely to incorrectly flag transactions as fraudulent. This can lead to ‘false declines’ – a phenomenon estimated to have cost Australian merchants $3.5 billion in lost revenue last year.⁵ That’s without considering the cost of managing chargebacks, which can generate losses of 250% the value of the initial transaction.⁶ So whilst in-house management may limit headline rates, a holistic view of their fraud costs has left many merchants in search of efficient alternatives. Learn more about False Declines in Part 2 of our Fraud Series.