8.21 The Outsourcing Option

Because of the dynamic and complex nature of detecting fraud in real time, some e-businesses may want to outsource the process, as banks have done with credit cards. A fraud-detection system enables an e-commerce site to counter criminal acts effectively via a subscription to a Web service provider that specializes in fraud detection via data mining or through a consortium network. One such fraud detection consortium is Retail Decisions, which works with card-not-present (CNP) transactions, primarily with operator-assisted credit-card payments over the phone, but also with e-commerce sites.

There is also CyberSource, which has an exclusive association with Visa U.S.A for matching fraud transactions. The CyberSource Internet Fraud Screen (IFS) system uses a combination of rules-based modeling and neural-network modeling techniques. It's IFS risk profile scores look at more than a dozen different information items, including the customer's local time and the risk associated with the customer's e-mail host. CyberSource also provides e-retailers with an IFS report that includes risk profile codes, address verification system (AVS) codes, and other relevant information to help e-merchants calibrate their risk thresholds and score settings. This enables the e-business subscribers to control the level of risk they want to operate under.

HNC, the long-time player in the area of credit-card fraud alerts, also provides its eFalcon detection consortium service geared toward telephone carriers and e-retailers. ProMiner is another Web service that can assist merchants in deploying advanced, scalable fraud detection without incurring large upfront capital costs for hardware, software, and implementation. The fraud-detection service allows an e-business to rely on data mining experts in the analysis of transactional, behavioral, and demographic databases. They mine an e-retailers' data, create the dynamic rules and code, and set up an alert system for a merchant with minimal impact.

A consortium or data mining fraud-detection Web service allows an e-retailer to focus on the core part of its business. These types of services typically use their own external servers, monitoring the transactional traffic that passes through a merchant site, matching the on-line behavior and profiles, so that anytime a potential fraudulent transaction is detected, alerts are sent directly to the e-business, which can then choose how to deal with the deviation.