THE CHALLENGE OF MANAGING FRAUD IN DEVELOPING COUNTRIES
Developing countries offer eCommerce merchants a great opportunity to grow their businesses. Aided by the growth in mobile internet penetration, eCommerce in regions like South America and Eastern Europe is growing by 20% annually, and is expected to continue growing at such rates through 2020*. According to a World Trade Organization 2013 report, “next-generation technologies and devices will increase usage of advanced mobile services, which in turn will open up many new, eCommerce business opportunities in developing countries.”
For many online merchants, minimzing fraud is often more challenging in developing markets than it is in established markets. Historically, there is less information available and fewer standards for reducing the level of fraud affecting Card-Not-Present fraud programs. Multiple factors contribute to the problem, including limited capacity and resources, an absence of accurate computerized auditing systems, and the prevalence of informal economies that often lack design and governance.
Some of the fraud prevention tools that are used in “more economically developed countries" (MEDC), are not yet consistently implemented in developing countries. There 5 key tools that minimize an eCommerce merchants exposure to fraud:
Sample-based reviews and robust KYC (Know Your Customer) commonly used in UK and US
Data mining (analysis which aims to discover evidence of problematic payments)
Educational activities and public communication to increase consumer awareness of how to avoid and report fraudulent activity
Clearly defined goals on fraud prevention and monitoring of performance
Simple mechanisms to report suspected fraud (like online forms)
While merchants in developing countries can gain advantages like for example, being close to low cost manufacturers, their knowledge outside of their headquarter region can be limited and cause daily challenges related to fraud and chargeback, resulting in reduced profit margins and ultimately increased operational costs.
Fortunately, merchants do not have to become experts in every market. Payment Service Providers, like Acardpay, adopt country and region specific approaches, with dedicated regional consultants in order to educate merchants effectively and efficiently. In developing countries, we conduct more granular reviews of card transactions with lower thresholds for review. We understand that the risk appetite of merchants management teams is frequently higher than appropriate due to the desire to grow exponentially and take advantage of market conditions. We protect merchants by having the necessary automated controls in place to mitigate the risks, helping merchants to avoid problems such as the inability to detect actual fraud from the large volumes of transactions being processed.
As the eCommerce market continues to grow, fraud prevention continues to evolve. There are many tools in the market for merchants to choose from. Some are more sophisticated, some are cutting-edge technology. All of them have two things in common: they require fraud expertise and they need to be independent from payment processing. In Acardpay’s 20 years of experience processing online payments from all over the world, we’ve seen clear ROI from well-managed fraud operations that combine the 5 tools outline above to create a clear framework that achieves long term sustainable sales growth while minimizing fraud risks.
As markets and countries mature and frameworks such as the above are embedded, managing CNP fraud will become more standardized, however until then it will continue to be more challenging than MEDC’s.
Learn more:
Read the Fraud Services Overview to learn more about Acardpay Managed Fraud Services which offer online merchant account dedicated fraud management, powerful real-time fraud prevention embedded payment processing, and comprehensive intelligence tools, to keep merchant’s fraud/chargeback as low as possible while raising their sales revenue.
For many online merchants, minimzing fraud is often more challenging in developing markets than it is in established markets. Historically, there is less information available and fewer standards for reducing the level of fraud affecting Card-Not-Present fraud programs. Multiple factors contribute to the problem, including limited capacity and resources, an absence of accurate computerized auditing systems, and the prevalence of informal economies that often lack design and governance.
Some of the fraud prevention tools that are used in “more economically developed countries" (MEDC), are not yet consistently implemented in developing countries. There 5 key tools that minimize an eCommerce merchants exposure to fraud:
Sample-based reviews and robust KYC (Know Your Customer) commonly used in UK and US
Data mining (analysis which aims to discover evidence of problematic payments)
Educational activities and public communication to increase consumer awareness of how to avoid and report fraudulent activity
Clearly defined goals on fraud prevention and monitoring of performance
Simple mechanisms to report suspected fraud (like online forms)
While merchants in developing countries can gain advantages like for example, being close to low cost manufacturers, their knowledge outside of their headquarter region can be limited and cause daily challenges related to fraud and chargeback, resulting in reduced profit margins and ultimately increased operational costs.
Fortunately, merchants do not have to become experts in every market. Payment Service Providers, like Acardpay, adopt country and region specific approaches, with dedicated regional consultants in order to educate merchants effectively and efficiently. In developing countries, we conduct more granular reviews of card transactions with lower thresholds for review. We understand that the risk appetite of merchants management teams is frequently higher than appropriate due to the desire to grow exponentially and take advantage of market conditions. We protect merchants by having the necessary automated controls in place to mitigate the risks, helping merchants to avoid problems such as the inability to detect actual fraud from the large volumes of transactions being processed.
As the eCommerce market continues to grow, fraud prevention continues to evolve. There are many tools in the market for merchants to choose from. Some are more sophisticated, some are cutting-edge technology. All of them have two things in common: they require fraud expertise and they need to be independent from payment processing. In Acardpay’s 20 years of experience processing online payments from all over the world, we’ve seen clear ROI from well-managed fraud operations that combine the 5 tools outline above to create a clear framework that achieves long term sustainable sales growth while minimizing fraud risks.
As markets and countries mature and frameworks such as the above are embedded, managing CNP fraud will become more standardized, however until then it will continue to be more challenging than MEDC’s.
Learn more:
Read the Fraud Services Overview to learn more about Acardpay Managed Fraud Services which offer online merchant account dedicated fraud management, powerful real-time fraud prevention embedded payment processing, and comprehensive intelligence tools, to keep merchant’s fraud/chargeback as low as possible while raising their sales revenue.
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