Archive for August, 2011

“Superficial” vs. “Inherent” Fraud Detection Rules

Tuesday, August 30th, 2011

There are two types of rules, “superficial” rules and “inherent” rules. Superficial rules are easier to create and they are straightforward to understand, e.g., transactions happening at certain retailers. These rules may be good for a few weeks and their performance drop quickly. Inherent rules capture more time lasting ( and usually hidden and mutli-dimensional) patterns of fraud behaviors. To create them,we may have to use more sophisticated methods including predictive modeling. The PRM SQL statements for some of these inherent rules that we created have 5,000 characters. These rules work like magic and have very low false positives.

Detection of Common Point of Compromise

Monday, August 1st, 2011

About 25% of compromised good cards identified by BDM will have fraudulent activities within the next 3 months. (In comparison, usually about 1% of cards alerted by a popular point of compromise (POC) service from a big company have fraudulent within 12 months.) The common points of compromise detected by BDM are highly accurate. Identifying POC accurately  and early and reissuing cards provide the following benefits: 1. It is better than real time fraud detection because the fraud loss can be stopped before it happens; 2. Reissuing cards  is less intrusive to good customers than blocking suspicious transactions.