6 important criteria for evaluating fraud detection tools

As companies operate in a challenging and uncertain economic landscape, many recognize that stronger fraud defenses mean lower risk exposure. 

But with thousands of vendors that pledge to help companies fight fraud on all fronts available, it can be challenging to choose the right tools to protect your business and customers. 

So which risk management partners can help your organization stay ahead of fraudsters, now and in the future? In this post, we share six key criteria for evaluating fraud detection tools from our recent webinar How to future-proof your fraud detection, featuring panelists Jamie Nunez, Director of Credit Operations, Ledflow, Rohan Sriram, Product Manager, Plaid, Eric Greenstein, Product Manager, Compliance and Fraud, Modern Treasury, and Louise O’Connor, Data Scientist, Inscribe.  

Read on to learn about the six main categories to keep in mind when evaluating fraud tools and 25+ specific questions to ask vendors to help you build a solution set that will withstand the test of time. 

25+ questions to ask every potential fraud detection vendor

Accuracy

Topping our list of criteria is accuracy. Quite simply, before the organization signs a contract with a new vendor, they need to be convinced that the tool does what its developers claim and that the partner has a plan for ensuring that the tool remains accurate as fraud techniques evolve. 

As you meet with fraud partners, remember that accurately identifying fraud isn’t just a way to reduce risk and lower potential losses from fraudulent or unqualified accounts – it’s also a way to drive efficiency in your business. Having a tool that delivers clear answers with minimal false positives helps your teams work smarter. It’s also a critical aspect of adoption since teams must trust the technology and its recommended next steps.  

Questions to ask:

• What is the scope of the tool’s detection capabilities?
• What is its rate of accuracy? What was the methodology used to arrive at this number?
• How precise is the tool in identifying fraud most common to the organization? Does this tool align with the company’s most important use cases?
• Does the tool offer a clear, simple, and specific explanation of fraud detected?
• At what point within the customer lifecycle is the tool relevant? Will detection at this stage satisfy the company’s needs and create a clear impact?
• What steps does the vendor take to make the tool more accurate and precise over time by incorporating specific data from past activity?
• What case studies or client references are available to back up claims made by the vendor?

Latency

Customers expect immediate service. Any delays or interruptions during the onboarding process will likelyo drive customers straight to a competitor.

But here’s the catch: For reputable patrons, friction may be the kiss of death, but for fraudsters, it’s a necessary and even useful tool. Selectively requesting more information and introducing hurdles during the onboarding process for suspicious or unusual cases – a concept we refer to as “coordinated friction” – is one way to lower risk without impacting the user journey for legitimate customers.   

Regardless of how the organization handles the onboarding process, an automated tool that provides accurate, near real-time answers should be at the heart of their system. This is the only way to serve at the speed and scale needed in the current landscape.

Questions to ask:

• What is the average processing time for the tool? What was the methodology used to arrive at this number?
• What limitations does the tool have in terms of processing time or volume?

Integrations

Any reputable vendor in the risk management landscape will admit that their solution does not provide complete protection across the entire fraud landscape – and it’s highly unlikely that a single solution will exist in the future.

As a result, organizations need to take a multi-layered approach to risk, adopting and integrating multiple defenses into a single, coordinated platform to provide comprehensive coverage. This means that the tool should be evaluated in terms of how well it complements the organization’s existing tool set and its ability to integrate with other tools via specific application programming interfaces (APIs). This is often a critical component for helping teams quickly identify fraud signals.  

Questions to ask:

• Does this tool integrate with the existing tech stack and enable data-sharing with other solutions? (Ask about the specific integration capabilities and API availability as it relates to the systems and programs used by your business.)
• Does the vendor provide integration and configuration services to ensure the solution is properly deployed within the current tech environment?
• Are there limitations on how the tool can be integrated?
• Does the tool provide high-quality and high-fidelity data that can be integrated with data from other systems to allow companies to apply advanced insights across the business?
• Does the vendor have a dedicated customer success or support team available for on-demand help and guidance?

Experience and ongoing innovation 

When evaluating risk tools, it’s important to consider how well the tool works today and how prepared the partner is to serve your needs in the future. The best partners will demonstrate the value they can provide to customers and the steps they are taking to make ongoing, incremental improvements that will help companies stay a step ahead in an evolving landscape. 

Also of note is the user experience provided by the vendor. Some high-tech solution providers may have best-in-class digital capabilities but have fallen short on providing an intuitive UX or offering additional support companies need to optimize their investment. Unfortunately, a lackluster user experience and/or substandard service from the vendor can impact adoption, which can lead to employees falling back on old processes or finding their own workarounds.

Questions to ask:

• Do you have a demo of how the tool works for a company like ours? Do you offer a free trial or pilot process?
• What training and development resources do you offer to help employees understand how to use this tool to its fullest potential?
• Does the vendor provide a clear and compelling roadmap for evolving and expanding the toolset to address emerging trends?
• Does the vendor welcome customer input to guide or influence short-term and long-term feature development?
• Does the vendor leverage the latest technological innovations, like AI?

Industry-specific use cases and success stories

The best tool on the market isn’t always the best tool for your business. It’s crucial that the solution can help your organization solve the specific challenges it is facing today and that the vendor is committed to evolving to meet the needs of the future.

Ideally, this means receiving a list of client references for companies within the industry that wanted to address the same issues. At a minimum, it means having the vendor share use cases specific to the sector.

Questions to ask:

• What are the primary use cases the product solves for? Can my challenges be solved with this tool?
• Does the vendor have experience working with companies in my industry in a similar capacity?
• Does the vendor support the documents that are most important for my specific use case?
• What client references or testimonials are available to support their claims?

Pricing

Pricing is a matter of practicality for every organization, but saving money on technology in the short term could lead to higher overall long-term costs due to a larger number of fraud cases. 

Companies need to consider the hard costs of every tool, as well as the value that tool represents in terms of productivity, avoided risk, resource optimization, and other important metrics.

Keep in mind that many of the best vendors won’t focus on low costs but on long-term value. For example, one of our fintech clients, Ramp, realized $300K in savings in avoided fraud for just three cases caught by our document fraud detection. Property management client GSC saved $76K in avoided eviction costs during their free trial period alone.

Bottom line: Price is a valid consideration, but don’t be shortsighted when choosing your risk partners.

Questions to ask:

• What is the total cost of ownership of the product?
• How flexible is the price structure?
• What ROI can be expected right away and in the first year?
• Does the company have examples of cost savings for for other clients?

Reducing fraud and credit losses with AI-powered fraud detection

The unfortunate reality is that the risk landscape will only get broader and more complex for companies. Since most organizations don’t specialize in fraud detection and prevention, it’s crucial to engage partners who have this expertise and can help navigate the omnipresent threatscape.

One of the biggest challenges identified during our webinar by all the panelists was the rise in document fraud. Data from the 2023 Veriff Identity Fraud Report showed a 31% increase in document fraud globally while analysis from Inscribe revealed a 300% increase in a specific type of document fraud: templates (fake, forged, or counterfeit documents purchased online) in 2022. These stats show that AI-powered document fraud detection is an essential component of every risk management strategy.

Want to learn how Inscribe can help your company catch document fraud? Reach out to our team to schedule a personalized demo.