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Fraud vs Customer Centricity - I

In my current engagement at a large retailer in the UK, I came across the seemingly paradoxical requirements between the Fraud Management team and the Business team. This has become an almost common theme across the various Multi-channel Order Management implementations that I have been involved in.

The business continues to harp on charging the customer as late in the Order Cycle as possible citing better Order Conversion and Customer centricity.  The Fraud Management team on the other hand wants upfront payments since they believed that the fraud risk is too high. And this discussion is all the more heated if the maturity of the retailer is not very high in the online space since the fraud team is more attuned to the store processes.

While this is a normal reaction that I have seen in most places, I do believe that Fraud Management and Customer Centricity are not necessarily contradictory requirements. There is a middle ground which does work for most situations.

The aim should be to decouple fraud prevention/management from the customer charging strategy.

Credit card fraud is just part of the problem as far as prevention goes. Fraud prevention is now becoming a standard procedure which involves using well known Order parameters around fraud (for eg. Flag for fraud check if Billing Address is not the same as Shipping Address), integrating with third party fraud management providers (like ReD, 3rd Man) and maintaining internal fraud repositories (blacklisted addresses, blacklisted customers, blacklisted cards). These checks and balances carried out offline in the Order Management System once the Order is placed would be key to reducing the fraud risk.

On the other hand, the strategy around the timing of charging customers is not a standard practice. Depending on the country and the type of retailer, this strategy varies quite a bit. While online retailers in the US are legally forced to not charge customers till the item is shipped (or nearly shipped), the UK does not have any such specific legal restrictions. Here it becomes more a decision around customer positioning and system limitations.

I believe that this strategy can to be tackled along two main lines. One would be to utilize the AVS/Authentication/Authorisation process provided by the various gateways intelligently. The second piece would be the modelling of the underlying Order Management process to handle this inherently.

I will discuss this in more detail in my next post.


Hi Prasad.
Very nice & precise article on a highly relevent topic. As the probability of fraud & possible remedies depend largely on geography of operations, request you to throw light in your next article on how to manage complexity of internal controls which need to be effective in multiple countries. Thanks.

Thanks for taking the time to read.

That is a very good question.

I have one potential opinion - The probability of fraud & possible remedies do not depend on the geography as much as your customer profile. From that point of view, fraud management becomes a combination of generic processes and very company specific controls. The generic processes are described very well in a white paper that my colleague, Guneet has written ( While that paper has a bias towards the US, it would be pretty valid across the board.

And for the company specific controls go, it would be very difficult to put down a definitive list and more importantly out of my area of expertise. :).



Thanks for the article on a very relevant topic, which has become one of the most common as well as fairly complex requirement in almost all eCommerce projects. As you mentioned, it is critical to get the right mix of 2 potentially conflicting requirements - better customer service and better fraud prevention.

Waiting to see more details in subsequent posts / blogs.


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