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Online retailers have long deployed front-end screening systems to check card-not-present transactions for fraud. A new software product announced Tuesday, however, is apparently the first commercially available product to automate what is now a heavily manual process of checking orders that don't pass these screens and yet are not unambiguously fraudulent. RapidReviewer, which eFunds Corp. has had under development for about a year and which will become available at the end of July, may find a ready market among Web merchants whose back offices are flooded with questionable transactions?any number of which could be good orders. Although eFunds has not yet signed a client for the product, “I've demoed this application for about 50 merchants, and they're excited about it,” says Michael J. Long, a former fraud-control executive with online travel agency Orbitz LLC, a Cendant Corp. subsidiary, and now director of fraud solutions for eFunds Retail Solutions, an Austin, Texas-based unit of the Scottsdale, Ariz.-based technology company and transaction processor. Online merchants' order-review departments are dealing with larger and larger work loads, according to industry statistics. Nearly three-quarters of online merchants perform manual order review, according to data from CyberSource Corp., an online- transaction gateway and fraud-management company. Among these merchants, the proportion of orders flagged for review hit 35% last year, up from 34% the year before and 26% in 2003, CyberSource says. “That's where the focus needs to be,” says Long. “Front-end solutions have become a commodity. Everyone has bought one or built their own.” RapidReviewer, says Long, will allow merchants to dispose of more transactions more quickly, or review the same volume with smaller staffs. At Orbitz, where Long helped develop a previous version of the system, review agents were able to plow through 200 to 250 orders per shift after the system was deployed, compared to 50 to 70 before, he says. “After we installed this, I was able to cut the review staff in half,” Long says. At the same time, the new system should cut both fraudulent transactions and the number of legitimate orders rejected on suspicion of fraud. By the time he left Orbitz to join eFunds in May 2005, Long says, attempted fraud incidents had dropped to nearly zero. “[Fraudsters] learned not to waste stolen credit card numbers on us,” he says. “Our fraud losses were immaterial.” Perhaps more important to Orbitz, he adds, was the added ability to detect good orders. Long estimates the revenue e-commerce retailers lose by rejecting orders that turn out to be okay is 10 times greater than their losses to fraud. “After we put this in place [at Orbitz], we had absolutely zero rejections without confirmation [the order] was fraudulent,” he says. RapidReviewer works by summarizing various review functions on one screen that normally occupy as many as 15. Signs of trouble–such as multiple attempts on the same card, non-matches between billing and shipping addresses, transactions run through an anonymizer?are presented in one place. The software also automates certain functions, including matching bank phone numbers to bank identification numbers so agents can call banks to check on cardholders. In some cases, it will also verify that cards belong to certain individuals without the need to call banks. This can be critical when agents can't get cooperation from bank officials. “There are some banks that do not want to help,” notes Long. “It's not their loss if the merchant gets hit.” Pricing is not yet final for the software, according to Long, who says retailers looking to create a similar capability in-house could face costs eight to 10 times greater than eFunds' fees. “If you're running a shop with 40 heads and we're able to reduce that by 10 or 15, it's an easy decision,” he says. Next year, he says, eFunds will roll out a hosted version of the system, with the goal of eventually introducing the product as a completely outsourced service. “Running a fraud team doesn't have to be a cost of doing business,” Long notes.
