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Adyen Risk Management Manual

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Minimize false
positives,
maximize revenues
MANAGING FALSE POSITIVES
For every blocked transaction, there is a chance that it
would have been a legitimate transaction. So a fraud
protection tool that is setup too rightly will block many
genuine transactions, and therefore have a negative
impact on revenues.
These transactions are called false positives:
transactions that a fraud system triggered as potentially
fraudulent (therefore having a ’positive’ result of the
fraud check and subsequently blocked) but which
actually would have been normal transactions not
resulting in a chargeback.
CHARGEBACK LEVEL MONITORING
The card schemes’ Chargeback Programs are designed
to reduce excessive chargebacks and fraud. These
programs are activated if the CTR
(Chargeback-to-Transaction) ratio rises above a certain
level, for instance 1% which would mean that more
than 1% of your transactions result in a chargeback.
If you are in such a program (for a certain period), then
fines may be levied. Depending on card scheme, the
exact rules may vary. Adyen’s account managers can
bring merchants up-to-date regarding these
regulations.
The Adyen backoffice contains a real-time monitor per
merchant account of the current CTR levels. Of course,
chargebacks can still occur after a long time, so the
value for last month can still increase in subsequent
months.
MANAGING THE SETTINGS
The risk management system calculates the final score
based on many checks that are performed on a
transaction. We will discuss some of the individual
checks further on in this whitepaper. Every check can, if
triggered, add a score to the total fraud score.
This means that merchants can experiment with the
settings to find the optimum between blocking too
many transactions and letting too many transactions
pass through. During setup of the merchant account
with Adyen, the account manager at Adyen will assist
and advise on a good starting point. But it is also part
of our standard operations to keep monitoring
performance of individual, industry-specific and global
risk management settings within Adyen.
There are several classes of real-time checks Adyen
performs on each transaction:
1. Referral list checking of card numbers, email
addresses, ip addresses: the comparison of data
points against a variety of databases.
2. Consistency checks like comparing countries of
the card issuer, card holder and merchant: the
comparison of data points against each other.
3. Frequency/Velocity checks (e.g. how often did
the shopper make a payment attempt in the last
hour).
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