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ROI: Part 2

January 11, 2010 by Chris Ryan

In a previous blog, we shared ideas for expanding the “gain” to create a successful ROI to adopt new fraud best practices  to improve.  In this post, we’ll look more closely at the “cost” side of the ROI equation.

The cost of the investment– The costs of fraud analytics and tools that support fraud best practices go beyond the fees charged by the solution provider.  While the marketplace is aware of these costs, they often aren’t considered by the solution providers.  Achieving consensus on an ROI to move forward with new technology requires both parties to account for these costs.  A more robust ROI should these areas:

• Labor costs– If a tool increases fraud referral rates, those costs must be taken into account.

• Integration costs– Many organizations have strict requirements for recovering integration costs.  This can place an additional burden on a successful ROI.

• Contractual obligations– As customers look to reduce the cost of other tools, they must be mindful of any obligations to use those tools.

• Opportunity costs– Organizations do need to account for the potential impact of their fraud best practices on good customers.  Barring a true champion/challenger evaluation, a good way to do this is to remain as neutral as possible with respect to the total number of fraud alerts that are generated using new fraud tools compared to the legacy process

As you can see, the challenge of creating a compelling ROI can be much more complicated than the basic equation suggests.  It is critical in many industries to begin exploring ways to augment the ROI equation.  This will ensure that our industries evolve and thrive without becoming complacent or unable to stay on top of dynamic fraud trends.

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