Global E-Commerce Fraud – Are Your Customers Real?

Here are four tips to reduce risk in the e-commerce space.

Yursil Kidwai | UPS

E-commerce brings many opportunities to quickly reach more customers nationwide and across the globe. It also brings risks of domestic and international fraud.

In the U.S., online fraud increased 39 percent between January and June last year, according to the October 2016 Global Fraud Attack Index.

Global e-commerce certainly carries risk, as well as opportunity.

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No matter the experience level of your business,  a fraud protection program is essential.

According to LexisNexis’ 2016 True Cost of Fraud study, international e-commerce fraud happens 2.5 times more frequently than domestic e-commerce fraud.

Many retailers are successfully conducting e-commerce across borders and expanding into new markets. Others are just starting to evaluate international e-commerce. No matter the experience level or size of your business, a fraud protection program is essential.

Here are four tips to help you reduce your e-commerce fraud risk around the world.

The Social Media Factor

Have you ever proceeded to check out on a retailer’s site and received the option to create an account with your social media login?

Creating an account using social media information is a convenient option for consumers. For retailers, it offers an enhanced level of security.

Social logins can verify consumers’ identities.

According to Worldpay’s Fraud Trends 2016, 56 percent of merchants place greater trust in customers who use social media logins, and 35 percent already use social media as part of their customer login process.

According to the Worldpay report, the main reason merchants use social media for fraud prevention is to check that an account and an individual’s identity are real. Although this process can be time-consuming, it give retailers information about their customers and reassurance that sales are valid.

The Mobile Factor

The UPS Pulse of the Online Shopper™ study revealed that 48 percent of U.S. consumers made a purchase on a smartphone in 2017 – up from 44 percent in 2016.

As more consumers shop on mobile devices, retailers are increasingly concerned about the risks of m-commerce fraud.

According to the Worldpay report, 59 percent of merchants believe there is a greater risk for fraud when shopping on a mobile device. This may be due to the lack of firewalls and virus-protection software on mobile devices compared to desktop and laptop computers.

Consumers are also at increased risk of downloading compromising mobile apps that fraudsters use to access their personal information.

Despite these challenges, fraud protection tools and techniques for m-commerce are readily available.

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Fraud protection tools and techniques for m-commerce are readily available.

For example, geolocation services help retailers verify that a consumer’s shipping and billing address match the IP address of the device used to place the order. A red flag is raised if someone says they live in Florida, yet the IP address shows they are in another country.

Device identification is another way to help prevent e-commerce fraud. It gives devices a “fingerprint” and tracks the shopping activities performed with them. Once fraudsters are identified, their devices can be blocked from future transactions.

Use a Fraud Protection Team

Algorithms, social media and data touch points are essential tools to investigate fraud.

Ultimately, these tools need to be leveraged by a team of dedicated fraud specialists who have expertise in detecting the evolving patterns of international e-commerce fraud.

The Association of Certified Fraud Examiners (ACFE) and other organizations create a system of experts that share knowledge about fraud networks. In many cases, these groups include federal and international authorities to share knowledge about new fraud rings and strategies they employ.

Leveraging this global communal knowledge is a critical factor to preventing international fraud.

Get a Fraud Protection Solution

In addition to social and mobile-specific fraud protection solutions, retailers should consider a broader set of protective measures for their international e-commerce sites.

Online shopping sites should look for and reject fraudulent credit card requests as part of a comprehensive global e-commerce strategy.

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Online shopping sites should look for fraudulent credit card requests as part of a global e-commerce strategy.

When technologies and expertise aren’t used, the costs can be high.

Take luxury jewelry company Miansai as an example. After launching its international e-commerce business, Miansai experienced every retailer’s nightmare. Thousands of dollars in fraudulent international e-commerce orders took a toll on the business, causing challenges with the company’s banking relationships.

For an enterprising jewelry company whose typical international order is 15-25 percent more than a domestic order, the stakes were especially high.

These issues, combined with high shipping costs and struggles providing an experience consistent with the company’s premium brand, motivated Miansai to outsource its global e-commerce operations. International fraud was eliminated virtually overnight. Miansai said this protected its business from fraudsters, boosting revenue and improving customer service.

The lesson from Miansai and others: Don’t let fraudsters get in the way of global e-commerce growth.

The password for success: prevention.

This article first appeared on Multichannel Merchant and was republished with permission.

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Yursil Kidwai is Vice President of E-Commerce for UPS i-parcel.

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