how to use fraud data to boost your business

September 13, 2019

By Rich Stuppy, Chief Customer Experience Officer at Kount

Digital businesses are increasingly turning to big data to help them make faster and better decisions, particularly when it comes to approving good transactions and rejecting fraudulent ones.

Fraud data can include basic payment details, like credit card number, expiration date and zip code, as well as more detailed information, like email addresses, device fingerprinting, mobile phone numbers and how long the person has been a customer. A vast amount of data can be used to build a complete digital identity for every customer and successfully stop fraud.

But fraud data can do more than just stop fraud. It can also reveal hidden, yet critical, insights into your business overall. Indeed, many companies are using the data generated by their fraud solutions for higher-value activities.

Here are five ways that leading businesses are using fraud data to solve complex business problems and derive added value from their fraud protection efforts.

1. Gaining a true understanding of customers

Even the most sophisticated marketers can benefit from fraud prevention data. The folks in marketing know exactly who is clicking the buy button and which customers are making the largest transactions. But what they don’t know is which of those transactions are ultimately being flagged as fraud after the buy button is clicked.

This means that some customers who the marketing folks think are converting on their site are actually not converting at all. For instance, when you look at your top decile of customers and subtract out the fraud actors who were stopped after clicking the buy button, it dramatically changes the profile of who your best customers are and how you should go about marketing to them.

When they factor in fraud data, marketing people can begin to change their assumptions and understanding of the ideal customer. The marketers might think they have significant opportunity in, say, Southeast Asia, based on who is clicking the buy button. They might do more targeted advertising in the region based on that activity. However, upon further review, the fraud data could reveal that almost all the transactions out of that area are fraudulent.

The lesson is, avoid spending marketing dollars on efforts to attract certain customers until research indicates whether or not those customers are real.

2. Stopping other crimes

PetSmart is using fraud detection technology to save $12 million annually by pinpointing fraudulent orders before they’re shipped. But PetSmart is also using its fraud prevention technology to discover insights about its business that it never expected to find.

For example, PetSmart’s fraud detection system noticed that one customer was purchasing an inordinate amount of dog shock collars. This caused the company to take a deeper look at the data. After investigating those transactions further, PetSmart grew suspicious and went to the police. In the end, the data helped connect the customer to a human trafficking ring.

3. Welcoming the sheep in wolf’s clothing

It’s no secret that a lot of transactions originating in China may be fraudulent. Even legitimate customers in China know that their transactions will likely be declined, especially if they’re buying luxury goods and asking for their order to ship to a city such as Shanghai. Most U.S. retailers simply won’t take that risk.

As a result, many legitimate and well-heeled customers from China actually act like fraudsters, using re-shippers, breaking up their purchases into smaller volumes and going out of their way to hide the fact that they’re ordering from China.

Fraud data can help you reveal a customer’s true intent and, in this case, connect with high-value clients even when they live in a high-risk region. It enables you to reach out directly to these customers and make it easier for them to do business with you, thus ensuring a great experience for what could be a very valuable customer.

4. Speaking the language

In another case, one apparel retailer that sold humorous T-shirts was evaluating its fraud data and realized that an abnormal amount of traffic was coming from German-language browsers. It turned out that one of its shirts was a legitimate hit in Germany.

This knowledge inspired the retailer to start serving pop-up ads in German on its U.S. site. Most experts would say that is a big faux pas. Au contraire. The company started seeing a huge increase in conversions from Germany and that boost in business gave the company the confidence to launch an international initiative that resulted in a significant boost to its bottom line.

5. Getting rid of toxic customers

Some customers, even legitimate ones, are worth losing. Take, for example, those engaged in the act of retail arbitrage. These customers buy products at a low price from an established online merchant, and then turn around and sell them for a higher price on their own pop-up ecommerce sites, pocketing the difference.

In many cases, these are customers who you don’t really want because they’re only interested in your heavily discounted products and loss leader inventory. Even though these customers are real and pay their bills, everything they buy is a negative-ROI transaction for your business.

The good news is that a fraud platform can uncover these low-value customers. From there, you can tweak your site to ensure these customers are delivered a customized user experience in which heavily promoted or highly discounted products are not available to them.

Fraud data can do more than just stop fraud—it can uncover deeper insights and transform your business. In today’s hyper-competitive, high-risk digital environment, you need every advantage you can get. The creative use of fraud data is a secret weapon that can help solve higher-level business problems and generate massive value for your business.