Sebbe Jones, 2Checkout’s Fraud Czar, has spent a majority of his professional career fighting online fraud. He is one of 2Checkout’s most valued employees and is regularly called upon by the industry to speak on the subject. The following two-part blog, which will conclude tomorrow, is Sebbe’s narrative on 2Checkout’s fraud fighting history, the lessons learned along the way and a brief look at his department’s methodology… that is, the part he is allowed to share with you. This rare glimpse into “Sebbe’s World” will provide you the reasons why 2CO’s fraud scrubbing service is so highly valued by its customers who receive the service as a value-add, and why no e-commerce business should attempt to stand alone in the war against online fraud.
Allow me a moment to introduce myself and talk about my history at 2Checkout. My name is Sebbe Jones. I am the manager of Fraud Detection and Prevention at 2Checkout and manage a staff of analysts and investigators.
We are very good at what we do, but don’t take my word for it. Let our record and departmental process speak for itself.
Today and tomorrow, I will post a two-part blog describing 2Checkout’s daily fraud mitigation efforts – what goes into our daily work, a little history behind the development and rejuvenation of our department, and ultimately explain why you shouldn’t try tackling fraud on your own.
In the beginning, 2Checkout started with a practical understanding of fraud protection. I joined 2CO when there were six of us crammed into a small office. Those were the days – when the entire company was smaller than my current department! Each of us played our own role but we also multi-tasked and overlapped with one another. We used homegrown systems to grow the business. For example, we had a fraud queue built from the ground up which started with tools provided by the credit card companies including AVS (Address Verification System), CVV (Card Verification Value) and GEOIP… the basics!
Initially, this was the extent of our tools and fraud protection. However, we were smart, innovative folks at 2Checkout and continuously improved our fraud system by getting our hands dirty on the front lines. The few of us who were knee-deep in reviewing transactions on a daily basis for legitimacy or fraud constantly “talked shop” and worked hard to add new tools and ideas to develop a more efficient and robust review process.
One of the newest tools helped us better determine how many attempts it was taking each customer to process an order. Our thought process was this — if a customer changed their information on each attempt, we flagged the order to take a closer look and “make better sense of the story.”
This process led to the development of “negative lists.” While reviewing past orders, if we could link an email, billing address, or credit card to a fraud attempt, we would add that specific information to our negative list database. Every time a new order entered our system and included one or more of these data points, it was automatically flagged for manual review. Interestingly enough, to ensure we were not punishing good customers in the process, the presence of a negative list resulted in the development of a positive list, to ensure our honest repeat customers were passing through the system quickly.
You get the idea… these were a few of the features that initially built the foundation of our fraud fighting system. We constantly evolved. We got better, and even started making a name for ourselves. We had to… There was no choice. We knew that no matter how hard we worked or how innovative we were in the process, fraudsters were working even harder and coming up with new ways to beat the system. We followed this methodic process daily and continued to learn and evolve into the department we are today. It was our job to stay one-step ahead of the fraudsters, so we constantly adapted and always will.
Throughout the learning process we began to realize how equally important it was to approve good business, as it was to stop the bad. In fact, it was more important.
After a couple years of building our homegrown fraud queue into an awesome tool, the business was growing faster than anyone ever thought. It was a great feeling to see our company grow into what it is today, but we would be lying if we told you we weren’t overwhelmed. Because of the growth, 2Checkout had some business decisions to make. We needed to enhance our user interface, and for those of you who have been with us for years, you will remember our move from Version 1 to Version 2.
The move to V2 was necessary and inevitable, and it was mostly a success. However, there was one very important thing we failed to move — the Fraud Queue — which we spent so much time developing. Quicker than you can say “chargeback” our fraud department went from alert and savvy to working in complete darkness. The tools we spent so much time building and putting in place to better mitigate fraud losses were gone in a flash. All that was left were our original fraud fighting resources — AVS, CVV, and GEO IP. Sure, these three resources were excellent tools even by today’s standards, but we no longer had any rules set in place. Suddenly, our fraud representatives were forced to review hundreds of orders a day. As a company, we were at the point where on average, we were reviewing 45% of our transactions for fraud, while best practices suggest most companies review less than 20%!
Fraud was coming in, and because we were reviewing such a large number of orders, identifying legitimate fraud was like finding the proverbial needle in a haystack. Even worse, we were stopping good sales in the process! With little good data to compare each order against and fewer tools to help us validate our decisions, we could no longer “make sense of the story.”
Read Part Two of Fighting Online Fraud With 2Checkout’s Sebbe Jones tomorrow, to learn how 2Checkout turned a negative situation into a positive and strengthened its system into a world-class fraud net!
