E-commerce is often thought of as a global business, and there are good reasons for that: for many, one of the attractions of buying and selling online is that the world is your oyster. In fraud prevention and detection, too, this attitude makes sense, since fraudsters are just as happy about the chance to steal internationally as real customers are about the ability to buy from anywhere legitimately.
There certainly are global trends in fraud, but this doesn't mean that treating every country in the same way will lead to good results. Birchbox recently discovered that ignoring differences between male and female shoppers led to men being wrongly rejected as 'fraud' (for more on why that can happen - and often does - read this post on 'false positives').
In the same way, it's crucial to understand global fraud trends within local context to avoid blocking genuine customers who simply don't fit the profile you're used to. Every country is different - you can't treat them as though they all fit the same model.
Considering Cultural Context Lifts Approvals
Cultural context is something that is often ignored when it comes to fraud prevention. Perhaps the reason for this forgetfulness is that fraud prevention is usually thought to be about preventing people from making purchases, rather than encouraging people to buy. But the thing is, because of the risk of false positives in fraud prevention (good customers rejected because they appear similar to fraudsters) building an understanding of location-related differences into anti-fraud does actually boost sales.
If you're using the model you know works in the U.S. to assess transactions elsewhere, you won't be able to distinguish with accuracy between good buyers and bad ones. E-commerce consumers in a different market don't act exactly like U.S. customers. If you assume they do, you'll either let through a lot of fraud or turn away a lot of good customers - or both.
Whereas, if you tailor your fraud prevention system to understand the subtleties of local differences, you'd be able to accept those false positives you used to throw away.
Example: Entering Chinese E-commerce
Chinese e-commerce is an interesting example, because many online retailers have recently started to consider the benefits of entering Chinese e-commerce. A new policy of increased economic openness has led to changes in the way international business can operate online in China, and the new opportunities are alluring to companies who would like to participate in the world's largest economy.
And Chinese consumers love U.S. products, and that's a trend that is only growing. In the holiday period of 2015, the number of China-based consumers buying U.S. brands online over the holiday season increased 7 times compared to 2014.
But the opportunity comes with risk attached. How many retailers are aware that online fraud cases in China increased by more than 30% between 2011 and 2014?
Effective fraud prevention is essential if retailers are to protect their profits from being eaten into by theft. How to ensure your fraud prevention and detection is effective? Make sure it's informed by local knowledge.
If you're used to U.S. e-commerce, then you'll need to know this about Chinese e-commerce:
- Mobile penetration is far greater in China, and that means m-commerce is more popular. So your fraud prevention needs to be optimized for mobile.
- AVS doesn't exist in China, so if you're relying on shipping/billing address matches and mismatches to block fraud, you're in trouble.
- Chinese buyers have different norms to U.S. buyers - their online behavior is different, and might seem suspicious to the untrained eye. They explore sites differently. Behavioral analysis needs to take that into account.
- Payments preferences are different in China - you might be used to PayPal, but Chinese consumers prefer Alipay. You need to handle both - without false positives.
- Chinese consumers like a bargain as much as their U.S. counterparts - or more so. So if you have a sale on, expect to receive a higher volume of Chinese traffic than usual. It doesn't mean you're being targeted by a Chinese fraud ring, and you won't want to turn these good customers away.
- If you're encouraging Chinese consumers to come to your U.S. site, bear in mind that Chinese consumers often use reshippers rather than sending direct. Similarly, they use acquaintances who happen to be travelling - after all, if your cousin's cousin is visiting New York, why not take advantage of that?
If you want to read more about how to adapt to Chinese consumers in particular, we can recommend several recent articles:
- China Welcomes More U.S. Merchants, But So Do Its Fraudsters
- How to Combat Fraud in International Markets
- Fraud-fighting tips for retailers entering the world’s largest e-commerce market
- When entering Chinese e-commerce, there is no substitute for local knowledge
Enter New Markets - with Sensitivity
In the same way that Chinese e-commerce has its own unique profile and Chinese online buyers their own preferences and patterns, every other market has a particular way of doing things that you need to understand to succeed in them.
Sadly, it is common for online retailers to avoid new markets out of fear that they will end up losing out. The danger comes from both directions - letting in too many fraudsters, and rejecting too many good customers. Neither is good for revenue.
But merchants who research new markets, or work with fraud prevention providers who understand international variety and how to accommodate it properly, can end up succeeding beyond expectations there. One of Forter's retailers found that, with Forter, they were able to start marketing to countries they would previously have blacklisted. In fact, with Forter, their international sales grew by 35%.
Approaching new markets with sensitivity and sense can lead to new areas of development for a company. With fraud prevention that's designed to work for customers anywhere in the world, businesses can focus on retail, and leave the fear of fraud behind.