This is the knowledge hidden in the electronic footprints of millions of online sales, and in particular of those transactions that resulted in fraud-related chargebacks. Advanced statistical models, such as neural networks, can extract the profile of fraudulent transactions from large historical databases and deliver that knowledge in the form of a mathematical formula. The formula can then be applied in real-time to incoming transactions, generating a risk score that's based on the attributes of the transaction. Insult rate is the term used when a merchant turns away a truly legitimate order. Not only is that customer lost forever, but you'll likely lose business from at least two of that customer's friends.
Merchants have to weigh the risk of accepting a valid order against the risk of losing the customer.
Human intervention is the best method for doing this right now. Technology tools can help identify which orders pose the most risk. All the tools mentioned here are complementary to each other as they review different risk elements of an incoming order. Since all transactions are different, you may have to manually review a small percentage of orders. Banks could offer the answer by implementing one-time credit card numbers for online purchases.