{"url":"https://www.clear.sale/blog/should-outsource-augment-ecommerce-fraud-protection","title":"Augment or Outsource: What Every Ecommerce Fraud Protection Manager Should Know","tldr":"Outsource or build in-house? Discover a third option for ecommerce fraud protection: augmenting your team to cut false declines and add global data.","markdown":"TL;DR\n\nBeyond the in-house-versus-outsource choice, e-commerce retailers have a third option: augmenting their existing fraud team with a vendor. Augmentation keeps internal staff and tools while adding worldwide fraud intelligence and a broad data network, addressing the siloed view and stereotypical data points that lead in-house teams into false declines, which 40% of consumers say would stop them shopping with a retailer again.\n\nEcommerce merchants – especially enterprise retailers – often have an all or nothing assumption about fraud protection, thinking their choices are limited to outsourcing or handling it in-house.\n\nThis approach, however, just isn’t realistic anymore, considering how many new challenges have arisen in the post-pandemic ecommerce era. Instead, ecommerce retailers should consider a third option: *augmenting*their fraud prevention.\n\nConsider this: A typical fraud prevention team within a large ecommerce retailer may have anywhere from one or two people to a few dozen employees.\n\nThat may seem like enough staff, but the online world has changed. And so has the workforce. [Data breaches](/blog/what-the-biggest-recent-data-hacks-show-about-account-takeover-fraud) have become commonplace, [workers are leaving their jobs in record numbers](https://www.npr.org/sections/money/2021/10/19/1047032996/why-are-so-many-americans-quitting-their-jobs), and the staff who remain are being forced to handle responsibilities outside of their skill set.\n\nBy the same token, many fraud prevention managers have a near-allergic reaction when they hear “outsource.” After investing time and energy training a team of fraud analysts and clarifying how their fraud filters should be set, the last thing they want to hear is that they should throw the baby out with the bathwater and hand the job over to someone else.\n\nThis is what makes augmenting the fraud team such a win-win solution.\n\n*“Clients automatically assume that outsourcing means replacing their staff. What we actually do is augment their staff so they don’t have to do some of the tedious things such as making phone calls to validate orders. This model increases an internal teams knowledge, toolset, and capacity. We free teams up to do the other responsibilities that help drive their business.”*\n\nWhen in-house teams *don’t*have this type of extra support, they face significant challenges that put their fraud prevention efforts at risk.\n\nLet’s take a deeper dive into how this plays out.\n\n## In-House Fraud Prevention Teams Can Struggle to Stay Up to Date\n\nFraudsters can attack an ecommerce store from anywhere in the world – which means the store’s fraud prevention team needs to stay well-versed on international fraud trends and tactics.\n\nThat doesn’t always happen. Instead, many in-house fraud teams remain somewhat siloed, focusing solely on the fraud that knocks on their proverbial door. And if they don’t receive regular training or intelligence on the international fraud landscape, those silos remain. In-house fraud teams are also siloed by only being able to see their own customers data, versus augmenting with a vendor solution that has access to a broad network of data, such as ClearSale.\n\nThis lack of breadth in most in-house fraud prevention training forces fraud analysts to stick with “stereotypical” data points, such as [billing and shipping mismatch](/blog/inside-ecommerce-guide-to-avs-mismatch), CVV validation and email addresses. But those data elements only offer a fraction of the fraud picture. Without a better understanding of current fraud trends and tactics, the risk of false declines increases.\n\n### False Declines Can Do More Damage Than Fraud\n\nA false decline happens when a valid customer transaction is mistaken for fraud and declined. In our most recent consumer study that looked at ecommerce behaviors and attitudes, we found the impact of false declines on an ecommerce retailer’s business is alarming: **A whopping 40% of consumers won’t shop with a retailer again after being incorrectly declined****, and 34% will most likely post something negative on social media about it.**\n\nLess experienced consumers will likely try again because they tend to assume there was some sort of mistake. And up to 60% of consumers may reach out to customer service when a false decline happens, but 21% won’t. That’s a lot of business to turn away.\n\nAnd when we look at younger generations separately, those numbers are worse – the percentage of loyal customers lost to a false decline increases to 45%. This is mostly because younger shoppers know of multiple other stores where they can find the same product, they know how ecommerce is supposed to work, and they expect to be approved.\n\n##\n\n## In-House Fraud Prevention Teams May Have a Narrow View of Ecommerce\n\nWhen in-house fraud prevention teams analyze transactions, they look at their own data and compare it to more of their own data. Most often, they don’t expand the view to include their industry, their region, their country or their continent.\n\nWhy? Because they don’t have *access* to that kind of data.\n\nWithout that big picture view, in-house fraud prevention teams are flying blind to some degree. Because they can’t cross-reference transaction data outside of their own customer base, they risk missing out on important fraud patterns.\n\n### Worldwide Fraud Intelligence Is Essential in Today’s Ecommerce Climate\n\nThe pandemic expanded every online merchant’s potential reach and has significantly increased cross-border ecommerce. Not only are new international customers shopping across borders, fraudsters from around the world (who likely have a rich history of fraud with other online merchants) are also expanding their reach.\n\nWhen fraud prevention teams have no insight or intelligence about that history, they either fall into the false decline trap and end up with unhappy customers or low approval rates, or they risk approving fraudulent transactions.\n\nThis is especially concerning when ecommerce retailers do business in countries like Mexico and [Colombia](/blog/ecommerce-market-watch-colombia), where online fraud is rampant and prevention is difficult to enforce. Even before the pandemic, [35% of Mexican online shoppers](https://www.amvo.org.mx/estudios/estudio-metodos-de-pago-y-fraudes-2019/) were victims of fraud and 60% felt that fraud was increasing.\n\nBanking institutions in Mexico don’t have the same checks and balances found in other countries, so consumers and retailers are somewhat on their own to prevent themselves from becoming victims of fraud.\n\n*“It takes time to understand the fraud trends in Mexico because those fraudsters are very effective and sophisticated. That’s why it’s important to have visibility into the patterns of fraudsters across the globe. We can detect fraud more easily and accurately.”*\n\nAs if the risks associated with data weren’t enough, in-house teams are subject to the same staffing woes befalling every company these days.\n\n## In-House Fraud Prevention Teams Are Often Overworked\n\nEmployee retention challenges are everywhere. Workers are quitting their jobs at will, taking vacation times when it’s convenient for them, and using sick time more than ever. All these factors place a heavier workload on in-house teams.\n\nThe timing couldn’t be worse.\n\nThe pandemic caused a huge surge in online shopping, along with an equivalent surge in fraud attempts. Keeping up with the volume and complexity of these attacks has driven many in-house teams to the point of exhaustion – at a time when companies can’t afford to lose even one more staffer.\n\nEcommerce retailers can find themselves overwhelmed quickly. The key is to find a way to bridge the gaps in your fraud prevention team.\n\n##\n\n## Ecommerce Retailers Benefit From Augmenting Fraud Prevention\n\nThere’s no doubt about it – only the most robust in-house fraud teams will easily manage the increasing volume and sophistication of today’s fraud attacks.\n\nBut what about everybody else?\n\nThat’s where the win-win approach of augmenting an in-house fraud prevention team comes into play: Ecommerce businesses retain their in-house fraud teams but lean on a fraud prevention partner to help them shore up, scale or round out their numbers – and their skillsets. Ecommerce retailers need a fraud prevention partner that can complement their team *and* processes with a customized solution.\n\nTake ClearSale client, a leading computer hardware supplier, for example.\n\nFraud prevention was the bane of the company’s existence, mostly because their team was spending too much time manually reviewing every order. ClearSale implemented a process that leveraged global fraud intelligence with selective manual reviews, resulting in a 65% decrease in false declines, a 17% increase in the average size of approved orders, and a one-day disposition on almost every order.\n\n*“When you bring in an experienced fraud prevention partner to strengthen your fraud protection team, not only does it free up internal resources to be more strategically allocated, it gives internal fraud teams a real intelligence boost. The partner will have a wealth of data and analytics into global fraud patterns and trends, giving your team a much more complete fraud picture and your company much better approval rates.”*\n\n**\n\n## ClearSale Collaborates with Online Retailers to Fight Fraud\n\nWhether it’s to add staff during peak seasons, handle flagged transactions, or provide more comprehensive fraud prevention services, ClearSale brings a massive global network and dataset that can instantly distinguish between a valid customer and a fraudster. We analyze a range of data points and conduct behavioral biometrics to offer an extremely high degree of accuracy.\n\nClearSale also has over 1,500+ highly trained analysts who can identify the validity of a high-risk order. We can also conduct a full analysis of any client’s database and industry to give them visibility into fraud trends as well as consumer behaviors and attitudes.\n\nIf you are looking for a partner to augment your fraud prevention team, [contact us](https://www2.clear.sale/getstarted) and one of our analysts will work with you to create a solution specific for your company’s unique needs.\n\n## Frequently Asked Questions\n\n### What does it mean to augment a fraud prevention team?\n\nAugmenting means adding outside support to an existing in-house team rather than replacing it. The vendor handles tedious tasks like phone calls to validate orders and adds intelligence, tools, and capacity, freeing the internal team for other work that drives the business.\n\n### Why not just keep fraud prevention fully in-house?\n\nIn-house teams often stay siloed, seeing only their own customers' data and relying on stereotypical data points like billing and shipping mismatch, CVV validation, and email addresses. Without broad data and current fraud trends, they risk both missed fraud and rising false declines.\n\n### Why can false declines do more damage than fraud?\n\nA false decline rejects a valid customer. Roughly 40% of consumers will not shop with a retailer again after being wrongly declined, and 34% will likely post something negative on social media. Among younger generations the share of lost loyal customers rises to about 45%.\n\n### Why is worldwide fraud intelligence important now?\n\nThe pandemic expanded merchants' reach and cross-border commerce, bringing both new international customers and international fraudsters. Without insight into a fraudster's history elsewhere, teams either fall into false declines or risk approving fraud, a serious concern in high-fraud markets like Mexico and Colombia.\n\n### How does augmentation help with international fraud?\n\nA vendor with a broad network can cross-reference transactions against data far beyond a single merchant's customer base, revealing fraud patterns an in-house team cannot see. That visibility is critical in markets where fraudsters are sophisticated and local prevention is hard to enforce.\n\n### Does augmenting replace the in-house fraud staff?\n\nNo. A common assumption is that outsourcing means replacing staff, but augmentation keeps the internal team and increases its knowledge, toolset, and capacity. It removes routine tasks so analysts can focus on higher-value responsibilities."}