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Introduction to Online Payments Risk Management

Book Description

If you've been tasked with building a team to handle risk management for online payments (RMP), this practical introduction provides a framework for choosing the technologies and personnel you need. Author and financial services executive Ohad Samet explains the components of payments risk management, and presents a coherent strategy and operational approach.

You'll learn the answers to questions you're likely to encounter in the first 18 months of operation, with information that Samet has shaped and tested over several years in the industry. This book is ideal whether you intend to be a one-person task force or work with dozens of agents and analysts.

  • Use both a portfolio and behavioral approach to analyzing and optimizing losses
  • Learn about your customers to determine if they can and will meet obligations
  • Build an RMP team for payment risk operations, analytics, and decision automation
  • Use linking mechanisms and velocity models to detect unusual activity among your customers
  • Design system and data architecture to facilitate your activity analysis
  • Implement the decision and loss-reduction mechanisms you need to act on your findings

Table of Contents

  1. Preface
    1. Why Was This Book Written, and Who Is It For?
    2. Acknowledgements
  2. I. Background and Theory
    1. 1. What Is Risk Management in Payments?
    2. 2. What Problem(s) Are We Trying to Solve?
      1. Optimizing Risk with a Solution-Based Approach
      2. Why Talk About Loss and Not Fraud?
    3. 3. The Two Leading Approaches to the Analysis and Optimization of Losses
      1. The Portfolio Approach
      2. The Behavioral Approach
      3. Which of These Methods Works Better?
    4. 4. How Should We Describe and Understand Behavior?
      1. Remember: People Make Mistakes
      2. Putting the Framework to Use
  3. II. Organization and People
    1. 5. The Goals and Functions of a Payments Risk Management Team
      1. What Does a Payments Risk Management Organization Do?
      2. Payment Risk Operations: Making Sure You Run Smoothly
      3. Decision Automation: Allowing You to Scale
      4. Analytics: Making Sure You Know What’s Going On
      5. Product Management: Bridging a Rather Narrow Gap
    2. 6. Hiring for Your RMP Team
      1. Some Important Comparison Points
      2. What If I Don’t Have Anyone?
      3. Hiring Your First Operator
  4. III. Tools and Methods
    1. 7. Detection: Figuring Out that Something Is Wrong
      1. Measuring Performance
        1. Measuring Offset Performance: Time-Based Cohorts
        2. What Should You Measure?
          1. Measure Your Defaults
          2. Measure Your Recovery
          3. Measure Your Rejections
          4. Measure Ops Performance
        3. What’s “Normal” Performance?
          1. Defaults
          2. Rejections
          3. Operations Performance
      2. Detecting that “Something” Is Happening
        1. Incoming Complaints
        2. Inflow
        3. Linking
          1. Some Linking Terminology
          2. How Complex Should Your Linking Be?
        4. Velocity
          1. Some Velocity Terminology
          2. Baselining
          3. Iterative Analysis
          4. Individual Merchant/Consumer Velocity Models
          5. General Outlier Detection Models
    2. 8. Analysis: Understanding What’s Going On
      1. Designing for Analysis
        1. Instrumentation and Data Retention
        2. Data Latency and Transformation
        3. Control Groups
      2. Best Practices for Ongoing Analysis
        1. Automated Segmentation and Tagging
        2. Root Cause Analysis
    3. 9. Action: Dealing with Your Findings
      1. Manual Review
      2. The Variable Library
      3. The Review GUI
        1. Main Consideration in GUI Design
          1. Decision Fatigue
          2. System Responsiveness
          3. Data Assimilation
      4. The Rules Engine
        1. Basic Functionality Requirements
        2. Performance Simulation
        3. Performance Monitoring
      5. Automated Decision Models
        1. What Are You Predicting?
        2. Which Algorithms Should You Use?
        3. Model Time to Market (TTM)
        4. The Feedback Loop
      6. Product and Experience Modifications
        1. In-Flow Challenges
        2. User Experience Changes
        3. Proactive Risk Management
      7. When Things Go Wrong: Dispute Resolution
        1. User Experience Design
        2. Back Office Efficiency
      8. Setting Up Your Team and Tools
        1. Buy vs. Build
        2. Which Vendors Should You Look For?
          1. Should You Buy an Off-the-Shelf Risk System?
          2. Detection Vendors and Social Data
          3. Must-Have Tools and Data Sources
        3. Don’t Forget Domain Expertise
    4. Epilogue
  5. About the Author
  6. Copyright