Maximizing Profit Efficiency as Overall Evaluation Criterion for Fraud Control

Most eCommerce fraud and risk departments use metrics like chargeback rate as a means of assessing their effectiveness. As a way of addressing the shortcomings inherent in traditional metrics -- such as the bias towards penalizing missed fraud -- profit efficiency is an alternate way of measuring fraud controls and has the added benefit of accounting for margins and the cost of goods. This whitepaper explains terminologies and the benefits associated with this metric, and includes detailed information on how profit efficiency compares to other fraud and risk metrics. The overview concludes with insights on how profit efficiency may be applied to various business and classification cases, including risk scoring and machine learning.