To find out online fraud prevention ROI it is essential to estimate damage by online fraud and choose solution that will cost significantly less than the fraud does. After all, there is no point to spend more money to prevent fraud online than it could possibly cost. Ideally, we are trying to bring value of fraud costs and fraud prevention costs to the minimum. Lets look where the numbers come from to make this decision.
Online Fraud Prevention ROI comes from:
- reduced customer acquisition and operating costs;
- prevented losses from account takeovers;
- reduced credit card and payment services fraud;
- improved marketing activities that are made possible because of reduced risk of fraud. An example of this would be more complex bonus schemes that let to stay ahead of competition, but require effective fraud prevention to be implemented.
- increase of customer satisfaction (i.e. in multiplayer games or social networks).
Online fraud prevention costs are typically formed from:
- online fraud detection solution costs;
- platform integration. Different solutions will require different amount of labour to work along with the platform.
- fraud analyst labour. Some solutions might require to be configured by expensive skilled fraud analysts.
- management costs. Often not perceived as a financial cost, but an anti-fraud solution that is complex to go live with may take time from executive management to finalise the integration, incurring direct labour costs and loss of opportunity costs.
Example: Online Fraud Prevention ROI in Online Gambling
To take these considerations into perspective, lets look at a typical case of an online gambling website. The website takes 1000 of new registrations per month with a $80 spending on customer acquisition and bonus costs. It has found out that 15% of new registrations are done by rogue players.
By using DupZapper to detect them early on, the company will save 12 000 registrations a year X 15% X $80 = $ 144 000 a year.