Many companies may be judging their fraud checks the wrong way

A Forbes piece argues that many companies may be measuring their fraud detection the wrong way. The result, according to the article, is that a tool can look strong on paper while still costing the business money.

What the article says

Fraud detection is software that tries to spot fake or stolen activity, such as a payment made with a stolen card. Companies score these tools to decide whether they work. Forbes says the scoring method itself can hide real losses.

One cost that is easy to overlook is blocking honest customers by mistake. A good customer who is turned away may not come back. That lost sale rarely shows up as a fraud loss, so a simple score can miss it.

Who it affects

Any business that takes payments or sign-ups online and relies on a tool to screen for fraud. Honest shoppers are affected too, since they are the ones wrongly stopped.

What to do

• Ask how your fraud tool is scored.
• Ask whether the score counts lost sales from honest customers it wrongly blocks.
• Do not judge the tool only by how much fraud it catches.

What is not known yet

The full article was not available for this report, so the specific measures Forbes criticizes, any figures, and its recommended fixes are not covered here. Readers who want those details should read the original Forbes piece.