Fraud ManagementHow to Limit Your Exposure to Risk & Find a Provider You Can Count On

The Top 10 Fraud Management Service Providers for 2023 & Beyond

With the internet at your disposal, you have greater access to eager consumers than ever before. Shoppers from around the globe can easily become regular customers. The world is your marketplace.

There’s a downside here, though: fraudsters can get to you just as easily as legitimate customers.

Online fraud management has become one of the greatest challenges you’ll face as a business. According to a recent report from CNBC, online fraud attempts jumped more than 25% in the first quarter of 2021. For high-risk verticals, the numbers are even more severe.

You can’t ignore this surge in fraud activity. Something needs to be done. But, like many merchants, you may not even know what options are available. Read on and we’ll explore this topic, and show you how to assemble the right fraud management strategy for your business.

What is Fraud Management?

Fraud Management

[noun]/frôd • man • ij • mənt/

Fraud management refers to an overarching strategy designed to identify and block potential online fraud. A comprehensive fraud management strategy also allows merchants to prevent future fraud occurrences and recover revenue lost to fraudsters.

Retail fraud isn’t a new phenomenon, but the internet has opened new worlds of opportunity for fraudsters.

The scope and reach of eCommerce means crooks can attack almost anywhere. At the same time, online anonymity makes validating the buyer’s identity very difficult. All things considered, it’s no wonder we’re seeing such a massive surge in fraud reports.

An effective online fraud management solution must address the problem from multiple angles. In addition to recognizing and understanding different threat sources, you’ll need to know which prevention and response methods work best in each situation. 

You’ll also need the ability to track down the true sources of fraud. This can be much more complicated than it sounds.

The Benefits of Effective Fraud Management 

A robust fraud management system should leverage technologies like machine learning. This can greatly enhance an organization's efficiency and reduce risk by detecting fraud patterns in real-time with less human intervention. 

Though some manual review will still be necessary, automated systems can greatly decrease time spent on this task. This will elevate team productivity significantly.

Your fraud management strategy may encompass:

Lastly, an effective fraud management system must ensure inter-departmental collaboration through a centralized interface. It should allow team members with varying permission levels to coordinate and implement anti-fraud strategies.

5 Key Components of Your Fraud Management Strategy

In the last section, we explained the main benefits of having a fraud prevention system. But, what are the first steps for building an effective, comprehensive fraud management strategy for your organization?

Here are the five key components you’ll need to prioritize in order to detect and manage risk:

The Trouble With “Pre-” vs. “Post-” Transaction Fraud Management

In a perfect world, we’d catch every act of fraud before it happens. No one would ever get ripped off. Unfortunately, we don’t live in that sort of world. 

So, what happens when fraud prevention practices are too stringent. Or worse, what if it isn’t stringent enough?

Is there a solution to these problems? Yes, and no.

One way to manage each situation is to determine how you plan to handle your fraud management. Will you opt for in-house management? Or, would your resources be spent more effectively by outsourcing?

In-House Fraud Management: Strengths & Weaknesses

The typical first response to fraud management is an attempt to use in-house resources. That’s a good starting point, as an in-house strategy can usually address easy-to-manage issues. It can clear out the “low-hanging fruit,” as it were.

Proponents of in-house management point out that their method is more cost-effective. They also argue that in-house fraud management allows them to react faster to situational changes and puts the process in the hands of people most familiar with the business.

There is some truth to this argument. However, fraud management is a multifaceted process. Requirements can vary dramatically according to industry, risk level, and other factors. A strategy that works for one merchant might be a complete bust for you. 

Also, an in-house management department has several strikes against it right from the start:

Outsourced Fraud Management: Strengths & Weaknesses

It’s hard for in-house teams to determine where fraud comes from. Even merchants who pay attention to such details often misinterpret data or rely too heavily on reason codes. Plus, at some point, the job simply becomes too big. It requires expertise in too many different areas for a casual, “part-time” approach to be effective.

From that perspective, it’s easy to understand why outsourcing fraud management is better for many merchants. The benefits should be obvious: professional handling, less stress for you, and a clear and measurable ROI. Outsourced solution providers can adapt more quickly to changing conditions than in-house teams.

Of course, there are still downsides to consider. Some of these include:

Build AND Buy: Leveraging a Multi-Layer Solution

Pre- versus post-transaction fraud management. In-house versus outsourced fraud management. What’s the best approach?

The truth is that you don’t have to limit your options to just one course of action. Instead, ask yourself: Which outsourced products or services would complement your in-house skillset? Which resources would be most useful before or after a transaction?

Allocating different practices to different parties could be the best approach to take. So, when it comes time to outsource to a professional or add various products, what should you look for? 

Here are a few questions to consider:

• Is it Customizable? No two businesses have the same risk. A, off-the-rack, “one-size-fits-all” automated solution will ultimately be ineffective.
• What are the guarantees? And what are those guarantees based on?
• What do you get for your investment? Can you analyze future growth potential well enough to budget accordingly?
• Are there client testimonials? Are you able to identify current customers who share common practices/products/sales models with you?
• Is the vendor adaptable and agile? Will their services be sufficient to support future technology and fraud developments?
• Do they have real-world eCommerce experience? Partnering with providers who know the merchant experience will help minimize risk without compromising growth.

Top 10 Fraud Management Service Providers

The provider you should turn to for fraud solutions depends on the specific areas where you need help. This list is in no way exhaustive. However, it does showcase a few of the most reputable vendors and their specialties.

Also, note that these are objective recommendations. We took a detailed look at the highest-rated fraud prevention companies in operation today, and developed a rundown of the leading service providers.

Ratings and reviews were averaged based on real customer reviews from sources including G2, TrustRadius, Software Suggest, and Gartner. The “pros” and “cons” we mention are also paraphrased directly from real, firsthand customer reviews.

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