Answer: As payment technology and protective measures advance, so, too, does the sophistication of today's criminals. Fraudsters have, without hesitation, accepted the challenges of thwarting new payment methods as they evolve. And in today's world, dollar losses to fraudsters aren't your only concern. Consider that every time you enact more stringent protection measures to prevent fraud, you will impact either the cost and/or ease of doing business with your customers. While fraud cannot be stopped altogether, you can reduce risk to the degree your organization is willing to invest in the tools to stay one step ahead of criminals and minimize customer impact. Minimizing the impact on customers today is not necessarily as simple as it has been in the past.
Following the events of Sept. 11, 2001, consumer awareness of the personal risk of fraud has been heightened as the global fraud rings that finance terrorist operations have been uncovered. With this new public awareness, managing fraud risk has become more complex. Today, you must take the consumer into account by reassuring them that you are fully protecting their financial information and by creating and implementing fraud-deterrence tools that will not adversely affect your cardholders. In the end, consumers want their payment methods to be simple and fast.
Arriving at that delicate balance where you can provide an adequate measure of protection without alienating your customer base is a major skill in the art of fraud prevention. You achieve this balance through a risk-reward equation in which your individual organization examines its risks and rewards for fraud deterrence by asking:
What criminal risks do you face, and how does your response affect your customer base?
What amount of reward will you receive through fraud-deterrence measures - how much money will your organization save by implementing the fraud strategies?
What amount of reward will you attain by securing your customer base in the process?
One way you can achieve balance is through a semiannual health check. It should include a close analysis of fraud encountered both within the organization and outside of it in similar organizations and industries if possible. The analysis will help your organization understand the fraud you face, which can lead to determining how to react to it and how to mitigate it in the future. This analysis should also lend insight into what kind of fraud may occur next.
Raf Sorrentino is senior vice president of account acquisition/risk management for the card issuing services subsidiary of First Data Corp. Sorrentino leads First Data's around-the-clock team helping to protect card issuers and cardholders from risk and fraud. As the head of Risk Management, he seeks to prevent losses and maximize revenue for issuers through developing comprehensive risk planning strategies that span the entire lifecycle of an account.
Sorrentino's team directly addresses some of the biggest challenges issuers face today: the ever-present threat of fraud and bad debt, as well as credit management. To help issuers address these challenges, First Data's proven risk management team offers sophisticated tools ranging from predictive models that help them select the right prospects to fraud scoring that helps predict activity that is potentially at risk. Additional monitoring, often performed by some of the world's most experienced fraud experts, rounds out First Data's unmatched solution set.
Sorrentino's risk management expertise spans more than 25 years, during which he has worked in the credit card business and served in management capacities in the United States and abroad. Sorrentino joined First Data in the U.S. in 1992 after holding several positions with First Data Europe in the United Kingdom from 1978-1991. He holds bachelor's degrees in business, finance and industrial engineering from several universities in the United Kingdom.
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