Fraud can be costly, but it needn’t be fought alone. That’s the idea behind Ethoca, a recently launched online platform that pools the customer payment data of its members. Members receive detailed, automated customer risk profiles. The 27 current members include online retailers and other customer-not-present businesses (those taking orders via phone, mail, and fax).
One member is online plane ticket vendor CostJet. The company wanted a way to successfully differentiate between good and bad transactions while reducing the number of manual reviews and improving the customer’s experience.
Before joining Ethoca, CostJet managed fraud with a software tool that used predictive algorithms. But because it lacked sufficient data, it never produced a clear picture, says CostJet President Jacque Salentine Busby. The company began rejecting anyone whose profile raised a red flag. As a result, too many customers were turned down, she says. Still, she estimates CostJet lost $30,000 annually to fraud.
With Ethoca, there is more data and a more detailed risk profile for each potential customer, which Busby appreciates. The risk profile consists of four parts. They include an overall score, from zero to 1,000; a summary of findings; a recommendation; and an in-depth, detailed section on historical data. The recommendation is based on the participating company’s risk level, which the company establishes beforehand. Customer information (name, address, phone number, credit card) is automatically and securely sent to Ethoca.
Located outside members’ firewalls, Ethoca takes extreme caution in safeguarding customer data, says CEO Andre Edelbrock. He says the infrastructure exceeds the PCI standards on customer financial data. It also meets the privacy standards of the American Institute of Certified Public Accountants and is regularly audited by internal and external parties.
After using Ethoca for several months, CostJet has only had two to three chargebacks, says Busby. Depending on the size of the participant, Ethoca membership costs from $500 to $30,000 a month.