Fraud in electronic commerce in Latin America
Anti-fraud strategy: Help boost your sales
What is eCommerce fraud?
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 under false identities.
E-commerce fraud negatively impacts merchants, customers, banks and payment platforms, causing financial losses 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 e-commerce and its impact
Mexico is the country with the highest risk of eCommerce fraud, ahead of countries such as Brazil and Russia, as the growth of this crime is 72% per year, which represents an increase three times faster than e-commerce itself.
Although there are several similarities between other countries and Mexico when it comes to committing some type of fraud, countries like Argentina have exactly imitated Mexico's eCommerce fraud, as they always seek to obtain products that are easy to sell, in high demand and at high cost; that is, products that can be easily sold and that provide the fraudster with a good profit.
Within Latin America, Brazil leads e-commerce sales with 36.3% of the market, with Mexico close behind with 24% ; it has also experienced an annual e-commerce retail sales growth rate of 16.3%, outpacing Brazil's growth rate of 12.2%.
“With more data breaches, increasingly clever fraudsters and new payment alternatives, online retailers need to be aware of their risks, especially considering that fraud has the potential to cost merchants more than 7.5% of their current revenue,” said 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 number of attempted fraud were the State of Mexico, Mexico City, Veracruz and Jalisco.
Clearsale , in addition to identifying these states with the highest 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, brand-name tennis shoes, alcoholic beverages, perfumes, and washing machines.
As 2022 approaches, with 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 with you 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 recorded 628,132 chargebacks on debit card transactions in the country, which represented more than 15 million dollars (323 million pesos) that online merchants had to absorb.
Chargebacks are costly, as for every $1 ($20 MXN) chargeback, sellers lose $2.50 ($55 MXN) in time, fees, physical goods, and shipping costs, which can bring your online business to a standstill.
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Avoid false positives
Rejecting all suspicious transactions can backfire on your business, as Aite reports that losses due to false positives are expected to rise to $443 billion in 2021.
But false positives can lead to lost customers rather than lost value during a purchase, as at least 32% of customers are falsely rejected and decide not to buy from that merchant again.
Have fraud prevention solutions
Merchants must invest in implementing in-house or outsourced fraud prevention solutions to help, as 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 dual-pronged approach—both manual and automated—that utilizes computer algorithms, custom rules, and proven statistical techniques to analyze current and historical data, fraud statistics across all industries, and transactional information.
Author: Victor Islas
More than 12 years of international experience in digital business transformation, focusing on Latam and the adoption of processes, cutting-edge technology, payment methods and fraud prevention for eCommerce.