ReD Beefs up Technology to Combat Growing Swarms of Fraudsters

E-commerce gateway Retail Decisions Inc. has announced enhancements to its anti-fraud technology that will, among other things, cut the number of transactions online retailers must refer for manual review by up to 30%. The Hazlet, N.J.-based operating unit of U.K.-based Retail Decisions PLC has integrated neural-networking technology called Prism and a database service called Dynamic Data Validation into its ebitGuard product for Web merchants. The move comes, the company says, in anticipation of a continued rapid rise in online transaction fraud. “Many industry experts forecast a continued rise in fraudulent card activity due primarily to the introduction of chip and PIN technology in Europe and increases in online retailing in the U.S., which will force more fraudsters away from traditional in-store shopping to prey on mail order, online, or over-the-phone transactions,” the company says in a statement. Chip and PIN is a smart card technology introduced in Europe to combat card fraud at the point of sale. ReD cites statistics showing a greater than 700% jump in incidents of credit card fraud on the Internet between 1998 and 2003. Dynamic Data Validation, which matches consumers' billing and shipping data with public records, also supplies information in some cases where address-verification and card-verification efforts fail, the company says, citing a reduction of as much as 30% in transactions referred for manual review in recent tests. Risk-management processes such as manual review can be costly for merchants, in many cases exceeding the cost of transaction fees such as interchange, according to recent studies. ReD's Prism technology relies on neural networks to find fraudulent patterns among streams of data, distinguishing these patterns from others that seem similar but are legitimate. As with most neural networks, Prism adapts to changes in consumer payment patterns, “learning” new behavior that may indicate emerging fraud trends. Together, ReD says, the new features should improve online merchants' approval rates while reducing manual-review loads. ReD's ebitGuard service is the subject of a patent-infringement suit filed against the company last August by CyberSource Corp., a Mountain View, Calif.-based competitor. ReD recently asked the U.S. Patent and Trademark Office to re-examine CyberSource's patent, a request the USPTO has granted (Digital Transactions News, Jan. 5). ReD's client base includes Walmart.com, Macy's.com, The Finish Line Inc., Buy.com, and Travelocity.com.