Context

NovaPay is testing a new fraud rule that blocks card transactions when a payment comes from a new device and the transaction amount is above $180. The risk team wants to know whether the rule reduces fraud losses without creating too much friction for legitimate customers.

Performance Data

The team ran the rule for 14 days on 1,200,000 transactions and compared outcomes to the previous policy.

The Problem

The new rule catches more fraud, but it also blocks many more good customers. You need to determine whether the tradeoff is acceptable and how to measure the rule's net business value.

Requirements

1. Interpret whether the new rule is an improvement overall.
2. Explain what the precision/recall changes imply for fraud prevention versus customer friction.
3. Use the confusion matrix and business costs to assess net impact.
4. Recommend whether to keep, tune, segment, or roll back the rule.
5. Propose follow-up analyses to validate the decision.

Constraints

• Each false positive block costs an estimated $4.50 in support and operational expense.
• Each missed fraud transaction costs $95 on average.
• Manual review capacity is capped at 4,500 cases per day.
• Risk leadership will accept some precision loss only if fraud savings clearly outweigh customer harm.