As clever as artificial intelligence has become, the human touch is sometimes needed to read between the ones and zeros. Fraud prevention tools are getting increasingly sophisticated, but there are still many transactions that fall into a gray area that may confuse your AI and require a manual review. It’s not a question of “if” manual review is needed, but of “where” can it be most effective. Let’s get you asking the right questions to determine where manual review can effectively assist your fraud prevention.

Fraud prevention AI is commonly referred to as your “fraud filter”. Before each transaction can proceed, fraud filters score them on their likelihood of fraud. When a transaction carries a known-stolen credit card, it scores high and is declined. However there are situations that are less clear, such as when an existing customer makes a purchase from an unusual location, the score falls into a gray area that may require a manual review.


There are actually two modes of review: the live review and the routine. Routine review is a regularly-scheduled maintenance of your automated fraud prevention measures. Live review is the real-time supervision of your fraud filters, where a person approves or declines borderline transactions. Routine and live reviews are not mutually exclusive — you may only need one, or you can have both. However, routine review will tell you if you need a live manual review.

Routine Reviews

If you’re running automated fraud filters on your transactions, they need routine fine-tuning. Depending on your volume, you can do this quarterly, monthly or even weekly. First, check how well the filters are working. Take a look at the declines, as well as any fraud or chargebacks that get through. Check where the signs of fraud are, and how your current filters scored them. Are there recurring patterns that you can adjust your filters to catch, or random one-offs with unique circumstances? The latter case may need live manual reviews to prevent.

Live Review

The live review requires an actual person to shadow the fraud prevention filters as transactions come in. A typical live review would include:

  • Reassessment of the transaction’s fraud score
  • Reverse lookup of customer information: phone, address, etc.
  • Contacting the cardholder to confirm identity
  • Contacting the card-issuer to verify account
  • Consulting your CRM for purchase history

The reviewer(s) would have to be familiar with the transaction stream and fraud history of your company and industry. Additionally, you would need someone on-hand/on-call and on-demand to look over any transactions that score in the gray area. Given the qualifications and commitment required, live manual review can be one of the more dollar-intensive fraud countermeasures.


Your business is unique. We can’t give you a definitive answer on whether you should employ manual reviews of your transactions; instead let’s ensure you’re asking the right questions to arrive at your own educated conclusion:

What is your fraud ratio?

To find this, divide your total monthly transactions by the number of known fraud transactions. If your ratio is approaching 1%, you may need live review to lower that rate. If you’re under .5%, focus on managing your post-authorization disputes.

Do you have pre-authorization fraud filters in place?

Manual reviews are tasked with optimizing your automated pre-auth fraud filters. If you don’t have pre-auth filters in place, start there. If you do, you’ll need to isolate where your fraud is getting through, and if you can plug it by adjusting those filters.

How much true fraud are you processing?

Fraud filters specifically target third-parties making unauthorized transactions with stolen payment credentials, aka true fraud. Manual reviews assist those filters in detecting fraud before it is authorized. If true fraud is a concern for your business, live manual review should be considered.

Do you have the resources?

Consider your personnel’s capacity to provide a review of your transactions – can you manage this in-house, with a new hire, or with outsourcing? Manual review may be necessary for your transactions, but is it enough work to keep an employee busy? Will the compensation you offer be enough to retain someone in that position? These are the two most important questions to answer if you’re manual review is to be done in-house. You’ll want to get your money’s worth, and you’ll want to retain someone that knows your particular processing landscape best. High turnover will significantly reduce this position’s effectiveness.

What does a manual review look like to your customers?

Will customers tolerate the added authentication or do they abandon you for the next merchant? Only you can answer this question. If you’re selling big ticket items, human review may actually be an expectation. In this context, the customer may appreciate the heightened scrutiny, and even welcome the personal attention.

However, in most other cases, the consumer expects instant authentication. Extra verification can add friction to the transaction, causing the customer to vacate the sale. In this context, consider more expedient verification measures such as two-factor authentication.

Where is your back-out point to reach ROI?

Figure out where your investment into fraud prevention pays off. Getting a return off manual reviews can be challenging. Your return may just be a lower fraud ratio. Focusing on post-authorization dispute management may actually be more cost effective. If your fraud ratios are good, or if false declines are hurting you more, you may forgo the manual review entirely. Know where your back-out point is, both with and without manual reviews.


Answer these questions to determine if manual review is a viable tactic in your fraud prevention strategy. If you have fraud filters in place, it’s imperative to conduct routine manual reviews of their performance. Fraud attacks are always evolving, so you have to ensure your countermeasures keep pace.

The frequency of these “gray” scores is an indicator of how much manual reviews are needed. If you’re catching a lot of false positives, or if fraud consistently evades those filters, you may consider implementing manual review into your authentication process. Considering the costs involved with live manual reviews, you may find your ROI by approving more of these gray area transactions, and dealing with negative consequences in post-auth. Again, it all depends on your specific needs as a merchant.