Manual Review

Table of Contents

1. What Is Manual Review?
2. How Does a Manual Review Process Work?
3. What Are the Drawbacks of Manual Review?
4. How Should I Utilize Manual Review?
5. Manual Review in a Nutshell
6. What Is a Manual Order Review?
7. How Long Does a Manual Review Take?

One of the most difficult problems facing e-commerce merchants is fraud. Without the need to get their hands on an EMV chip, fraudsters have a much easier time obtaining and using stolen payment credentials online. In order to prevent these fraudulent orders from going through, which would inevitably lead to a chargeback, merchants employ a variety of fraud prevention tools and software. Unfortunately, even the most advanced of these tools are far from perfect.

Merchants have to strike a careful balance when adjusting the parameters of their fraud prevention tools. Be too strict and you'll turn away legitimate customers. Too lenient and you might lose significant revenue to true fraud chargebacks. Of course, putting the dial somewhere in the middle means you're letting through some fraud and rejecting some legitimate customers. That's where manual review comes in. What is manual review and how can merchants use it to optimize their fraud prevention strategies?

When you’re trying to bring down a rising chargeback rate, one of the most persistent challenges is dealing with true fraud. While friendly fraud chargebacks can be fought and won, and merchant error chargebacks can show you where you need to improve your business operations, by the time you see a true fraud chargeback it’s too late to do anything about it. The only thing you can do to beat a true fraud chargeback is prevent the fraud before it occurs.

Tools that screen for fraud during the transaction process can identify many possible fraud indicators: Mismatched addresses, suspicious IP or location data, strange ordering patterns—there are all sorts of red flags you can look for, and they can vary depending on the country, industry, even the individual merchant. Anti-fraud screening tools can apply rules that look for these signs and block orders that fit certain criteria, but because of the subjective nature of interpreting certain fraud indicators, they do make mistakes sometimes.

Most fraud prevention software uses either a set of rules or an algorithm to score incoming orders based on how likely the software thinks they are to be fraudulent. Orders with a risk score below a certain number are automatically approved, while orders with a risk score above a certain number are automatically rejected. For merchants who use fully automated fraud prevention, these numbers are the same. The software makes an automatic determination for each transaction.

Using manual review involves finding the gray area where many legitimate transactions are being rejected and many fraudulent transactions are being approved.

When an incoming order falls in this gray area, the fraud prevention software doesn't make an automatic decision. Instead, the order is put on hold and flagged for manual review.

A member of the merchant's review team then examines the order and decides whether or not it should go through. Since the human mind sees things very differently than a computer algorithm does, the review team will often be able to spot indications of fraud or legitimacy that the software missed.

Typically, the orders that are flagged for manual review are those that aren't low-risk enough to be automatically accepted, but not high-risk enough to be automatically rejected. Of course, where exactly these lines are is up to the merchant, as almost all fraud risk analysis tools can be calibrated for the individual needs of a specific business.

Typically, the manual review team will start by taking a look at whatever aspects of the transaction caused the automated system to increase its risk estimate. However, it's important to have as much information available as possible in order to increase the review team's ability to make accurate judgment calls.

The team should have a variety of tools and methods to assist them in researching and analyzing orders. At a minimum, they should be able to perform a reverse lookup to verify the customer’s identity and address, and be given access to customer and order databases to review past activity. The team might also be tasked with authenticating orders by calling up the customer or their bank directly.

Ultimately, it is up to the judgment of the manual review team to decide whether the order should be processed or declined.

The merchant still gets the final say, but at this point, they should be able to feel assured that every reasonable effort has been made to find out whether the order is fraudulent or not.

While manual review may be a better way to handle orders that skate on the edge of acceptability than simply placing blind trust in automated systems, it’s far from foolproof and comes with a fairly high increase in overhead costs. Manual review can also create bad customer experiences if they take too long to complete.

Small merchants with low order volume and sufficient available staff may not have any issues doing manual review in-house, but the process does not scale up very well. Large, high-volume merchants will likely find themselves looking at outsourcing solutions.

Another issue with manual review, especially if it’s done in-house, is that it relies on subjective human interpretations that can be just as error-prone as rigid rulesets.

Each member of your manual review team will develop their own idiosyncratic ways of reading the data and their own personal thresholds for what crosses the line into fraud, and it will take time and experience to develop consistent, reliable judgment. Turnover on the manual review team means starting this process over, which leads to outcomes of varying quality.

For in-house manual review teams, it may benefit merchants to offer pay, benefits, or other incentives above and beyond the industry standard in order to reduce this turnover. In particular, offering annual pay increases for manual review staff can help retain more experienced and effective employees.

When outsourcing manual review, merchants will need to ask some questions up front in order to ensure that the service meets their expectations and delivers a positive ROI, such as how much time manual review will add to the purchase process, and who carries liability for fraud on transactions erroneously approved by the reviewers.

While it can be difficult to know the experience and skill level of the staff maintained by a particular manual review service, if that service takes on the costs of any fraudulent transactions that slip through, you can trust that they are incentivized to have the most effective team possible.

The best application for manual review is to handle the orders that carry some signs of fraud, but not enough that you feel comfortable rejecting them outright. Again, each merchant will have a different sense of where to draw the line here, and it may take some trial and error to find the balance of acceptances, rejections, and manual reviews that works best for your business.

With this smaller pool of ambiguous orders subject to manual review, you can train and work with your staff or third-party provider to develop the guidelines and methods that produce the fewest unnecessary rejections without increasing your fraud rate.

Merchants should not rely too heavily on manual review as their primary method of detecting and stopping fraud. It’s just too time-consuming to be practical for most merchants, and automated tools can screen out low-effort attempts at fraud much more efficiently.

Manual Review in a Nutshell

Almost every merchant has had the experience of trying to make sense of an order with inconsistent or incomplete information and trying to decide if it can be salvaged. Manual review is simply a formalization of this intuitive process that focuses on fraud. For merchants, the question is whether they’re experiencing fraud and fraud-related chargebacks at a high enough rate that it makes sense to invest in a more rigorous and consistent manual review system.

Fraud prevention is key to any chargeback management strategy, and it always requires a multi-pronged approach. Manual review can effectively supplement your automated anti-fraud tools, just make sure you’re stopping enough fraud and recovering enough valid orders that it’s worth the time and labor you’re putting into it.

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