Rather than considering fraud as a ‘cost of doing business,’ organizations should commit to the important work of building and implementing a comprehensive fraud prevention program, and in doing so, will experience increased revenues, higher profits, and happier and more loyal customers. Every organization that reduces its fraud rates also drives down the return on investment that bad actors currently enjoy.
In order to accomplish this goal, each organization should methodically create, implement, and refine a series of processes that build on one another to create an effective, decisive, and agile program. These processes start with the asking of basic questions, capturing fundamental order data, and defining rudimentary workflows. Only after an organization has become proficient in its existing processes can it ask and reasonably expect to answer the next set of questions. This evolution cannot be shortcutted, but it can be accelerated.
The Fraud Prevention Maturity Model
It is for this reason that we at Fraud.net, as independent technologists, have studied hundreds of leading retail organizations, have poured through the many billions of data points they provided, and have sought to organize some best practices in online fraud prevention and to provide retailers with the clearest path to eliminate their e-commerce fraud issues.
As such, we have created a maturity model as the framework to help organizations of all sizes, in all industries, to deal with payment fraud schemes of all varieties. This guide offers questions to ask and solutions to consider to control or eliminate their respective fraud problems. Although every retailer has a unique fraud profile with very distinct characteristics, different vulnerabilities, and varying resources at their disposal, this framework can provide some guidance to each.
What is a Maturity Model?
A maturity model, in its most common sense, is a methodology with which businesses can assess how well they are operating and their capacity for improvement. It provides a framework to assess the “maturity” (growth) of a business and how they’ve tested, adapted, and optimized their operations. Maturity models can be useful tools with a multitude of benefits. Some of these include clear benchmarking, closing performance gaps, and creating discipline through creating a common language on what the goals are and how to reach them.
So, the Fraud Prevention Maturity Model (FPMM) can be viewed as a set of structured levels that describe how well the behaviors, practices, and processes of an organization can reliably and sustainably produce the required outcomes. The model can be used as a benchmark for comparison, an aid to understanding, and a basis for further process improvement.
Structurally, the model involves five aspects:
- Maturity Levels, which compose a 6-level process maturity continuum, where the uppermost level is a notional ideal state where processes would be systematically managed by a combination of process optimization, continuous process improvement, and pre-emptive actions to avert problems before they occur.
- Key Process Areas, which identify clusters of related activities that, when performed together, achieve a set of goals considered important.
- Goals, which set objectives, scope, and intent for each key process area. The extent to which the goals have been accomplished is an indicator of how much capability the organization has established at that maturity level.
- Common Features, which include practices that implement and institutionalize a key process area. There are five types of common features: commitment to perform, ability to perform, activities performed, measurement and analysis, and verifying implementation.
- Key Practices, which describe the elements of infrastructure and practice that contribute most effectively to the implementation and institutionalization of the area.
In combination, these aspects allow a business to review and optimize its fraud management processes and where they can correct and update.
The Six Maturity Model Levels
A good maturity model contains six levels in its continuum, a constant workflow to review and improve processes. The levels and the actions that can be taken to move fraud prevention processes up in sophistication and efficiency are as follows:
| Maturity Levels | Description | Questions | Actions |
| Level 1: Initial | It is characteristic of processes at this level that they are typically undocumented and in a state of dynamic change, tending to be driven in an ad hoc, uncontrolled, and reactive manner by users or events. This provides a chaotic or unstable environment for the processes. |
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Start manually reviewing orders as an initial defense. |
| Level 2: Repeatable | It is characteristic of processes at this level that some processes are repeatable, possibly with consistent results. Process discipline is unlikely to be rigorous, but where it exists, it may help to ensure that existing processes are maintained during times of stress. |
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Establish an initial set of reports to identify problems after they have occurred. |
| Level 3: Defined | It is characteristic of processes at this level that there are sets of defined and documented standard processes established and subject to some degree of improvement over time. These standard processes are in place (i.e., they are the AS-IS processes) and used to establish consistency of process performance across the organization. |
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Create rules to set aside certain orders for manual review. |
| Level 4: Managed | Using process metrics, management can effectively control the As-Is process. Management can identify ways to adjust and adapt the process to particular projects without measurable losses of quality or deviations from specifications. Process Capability is established from this level. |
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Establish broader and deeper reporting and screening capabilities. |
| Level 5: Optimizing | Defined by continually improving process performance through both incremental and innovative technological changes/improvements. Processes are concerned with addressing statistically based, common causes of process variation and incrementally changing the process to improve performance. |
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Refine internal processes, statistical analyses, and process automation |
| Level 6: Collaborating | Defined by continuous internal improvements combined with real-time feedback from external marketplace participants. Processes are concerned with processing, understanding, and incorporating live market data in automated decision-making systems to anticipate and prevent order defects before they occur. |
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Share real-time fraud data with peers to more quickly identify known fraudsters, reliably process manual reviews, and expedite good orders. |
It is important to reiterate that no step in this continuum can be skipped – it can only be accelerated with the help of technology like machine learning and AI and through partnerships with firms that can optimize your processes. Fortunately, that’s where Fraud.net comes in.
Let Fraud.net Be Your Partner in the Fight Against Fraud
Fraud.net’s end-to-end, award winning platform leverages state-of-the-art AI and machine learning technologies to assess, refine, and fortify businesses’ fraud prevention strategies comprehensively. By integrating these technologies, we can strategize a rapid and efficient evolution of fraud prevention processes for your business, facilitating quicker adaptation and optimization.
With the economy in constant flux, with threats evolving on a daily basis and new technologies being introduced regularly, you need to keep an eye on the maturity of your fraud prevention tools. Where can you improve as fraud threats change in intensity and methodology? What processes are outdated and need to be reviewed?
Let Fraud.net be your partner through the whole process, from recommendation to implementation and optimization. Contact us today to learn more.