Despite the wealth of publicized information about the high prevalence and high costs of corporate fraud, it is always surprising to learn that so many companies operate without systematic fraud prevention programs or do not regularly review their programs. When it comes to fraud protection, most people tend to focus on the cost of losses from fraudulent activities. This common but narrow-minded strategy is understandable because fraudulent sales are expensive and often easy to calculate. However, the true cost of a fake transaction can be two to three times the original purchase amount. Losses from fraud that are large enough to threaten the very existence of your business are relatively rare, but they can happen.

Newer technologies such as EMV have reduced the risk of card fraud, while at the same time data breaches have created a rapidly growing market for stolen card data. Technology has led to scammers using the internet and living a life of crime from the comfort of their homes, leading to an increase in online and card fraud.

Research by the Association of Certified Fraud Examiners (ACFE) found that "a typical organization loses 5% of its revenues from fraud each year," with an average loss of $145,000 per case.

The natural response of an online business is to increase security and ensure that no bots or scammers breach their protections. But what happens when these protections become too strong and even your real customers can't get past them?

Well, you lose money. Valuable sales are lost and affected customers are unlikely to return to your company. A disgruntled shopper turning to social media can do more damage to your brand—not exactly as viral as you'd like. And the money you spend driving traffic to your website will also be lost.

According to research

-Oracle has shown that 89% of consumers will leave a vendor after a bad experience, and 86% will pay more for a better experience.

-Nielsen's research revealed that 92% of consumers trust recommendations from people they know when shopping.

If you disappoint your real customers, you can lose much more than the scam can steal. That's why a balanced fraud prevention strategy is so important. If you have a strong fraud prevention program, your investors, partners and auditors will have more confidence in your ability to control your destiny.

Consider the following:

Imagine one of your VIP customers is traveling and placing a large order. For Eid delivery, the order is sent to a different address. An extremely strict scam program kicks in and automatically cancels the order because the delivery address does not match the address registered on the customer's payment card. Now the customer needs to call to find out why his order was cancelled. Without the right tools, he may not even know there is a problem with the order.

Now what will this income be? What will happen to this customer's future revenue? How many people will they complain about this experience? After all, a bad customer experience will reach twice as many people as a good customer experience.

What can you do about it?

Unless you design and implement an anti-fraud program using best practices, you won't know where the vulnerabilities are in your organization. However, just because you don't know about them doesn't mean they don't exist. The best solution is to implement a fraud prevention strategy that minimizes both false positives and genuine fraud. Manual reviews or automated risk assessments can help e-commerce businesses create a balance of fraud protection. For other businesses, setting up two-factor authentication for customer sign-ins or verification steps for unknown devices can help minimize false positives. Strategies will depend on the most common problems each company faces and the level of risk they are willing to accept.

The first step should be to carefully review the fraud protections currently in place and determine what types of fraud are still passing through these protections. Then look for issues arising from your existing systems, such as canceled orders or locked accounts for regular customers. Based on this, determine your acceptable level of risk and use your fraud prevention tools for all common fraud issues.