Fraud in electronic commerce in Latin America

Latin America occupies the third place with the highest number of internet users after Asia/Pacific and the Middle East/Africa with more than 360 million. That puts it ahead of North America and Europe in terms of opportunities for online sales.

Anti-fraud strategy: Help boost your sales

What is fraud in Ecommerce?

E-commerce fraud is a criminal activity that involves using Internet services or programs to deceive or take advantage of other people or companies that carry out online transactions.

There are different ways to commit this type of fraud, such as using false or stolen credit card information, requesting fraudulent refunds, taking over other people's accounts, or making purchases with false identities.

E-commerce fraud negatively impacts merchants, customers, banks and payment platforms, causing financial loss and reputational damage.

To prevent fraud in e-commerce, it is important to implement security measures, such as identity verification, risk analysis, anomaly detection, and data protection.

Fraud in electronic commerce and its impact

Being a global hotspot for e-commerce retailers thanks to increasing internet penetration rates as more and more consumers go online, it has also become an opportunity for cybercriminals to scam customers if not take the necessary precautions.

Mexico is the country with the highest risk of eCommerce fraud, over countries like Brazil and Russia, since the growth of this crime is 72% per year, which represents an increase three times faster than that of electronic commerce itself.

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Although there are several similarities between other countries and Mexico when carrying out some type of fraud, countries like Argentina have exactly imitated eCommerce fraud in Mexico, as they always seek to obtain products that are easy to sell, high in demand and high costs; that is, products that can be easily sold and that give the fraudster a good profit.

Within Latin America, Brazil leads e-commerce sales, with 36.3% of the market, and Mexico is close with 24% ; In addition, it has also experienced an annual e-commerce retail sales growth rate of 16.3%, surpassing Brazil's growth rate of 12.2%.

“With more data breaches, increasingly savvy scammers, and new payment alternatives, online retailers need to know their risks, especially considering that fraud has the potential to cost merchants more than 7.5% of their current revenue.” commented Victor Islas, Country Manager of ClearSale Mexico.

According to the study The true cost of fraud in Latin America 2021, 34% of fraud attempts are through mobile browsers, as retailers and companies offering mobile commerce increased from 69% in 2019 to 87% in 2021 .

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These figures are alarming since during the Buen Fin in Mexico, the states with the highest fraud attempts were the State of Mexico, Mexico City, Veracruz and Jalisco.

Clearsale , in addition to identifying these states with the greatest fraudulent activity in e-commerce, also found that some of the products most sought after by fraudsters are high-end cell phones, 40 to 50 inch screens, video game consoles, tennis brand name, alcoholic beverages, perfumes and washing machines.

With 2022 approaching, and global online sales expected to reach up to $4 trillion by 2025, merchants need to start innovating their security to stay one step ahead of fraudsters.

How to avoid fraud in e-commerce

For this reason, we share some actions that you can take into account within your company to prevent your online business from being affected:

Avoid chargebacks

Currently, Mexico has the highest percentage of online fraud in the world at 3%. In the first quarter of 2021 alone, Condusef registered 628,132 chargebacks on debit card operations in the country, which represented more than 15 million dollars (323 million pesos) that online businesses had to absorb.

Chargebacks are expensive, because for every dollar ($20 MXN) of chargeback, sellers lose $2.50 ($55 MXN) in time, fees, physical goods and shipping costs, which can stop your online business.

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Avoid false positives

Rejecting all suspicious transactions can be counterproductive for your company, since according to a report by Aite, losses due to false positives are expected to increase to $443 billion in 2021.

But false positives, more than the value lost during a purchase, can also cause customers to be lost, since at least 32% of customers are falsely rejected and decide not to buy from that merchant again.

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Have fraud prevention solutions

Merchants should invest in implementing in-house or outsourced fraud prevention solutions to help, because fraud prevention tools built into a shopping cart platform do not always correctly detect attempted fraud.

One of the best ways to do this is by employing a fraud prevention strategy that uses a two-pronged approach, both manual and automated, using computer algorithms, custom rules and proven statistical techniques to analyze current and historical data, fraud statistics across industries and transactional information.
Author: Victor Islas

More than 12 years of international experience in digital business transformation, focus on Latam and the adoption of processes, cutting-edge technology, payment methods and fraud prevention for eCommerce.

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