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How e-retailers can minimize fraud when expanding into emerging markets
Payment security is a top concern for European retailers expanding in emerging markets, according to a CyberSource study. In particular, the rapid growth of mobile commerce in those regions creates its own set of fraud challenges.
86% of European e-commerce executives say they are planning to expand internationally this year, and 35% say they see the biggest opportunities in emerging markets like Russia, Brazil or China, according to CyberSource’s Payment Management Perspectives study. Yet 87% of executives cite concerns about payment security as a potential barrier to their e-commerce expansion, the study says.
CyberSource is a payments and fraud management company owned by Visa Inc. On its behalf, market research firm Vanson Bourne surveyed 300 executives in the United Kingdom, France and Spain about their 2014 e-commerce and m-commerce growth and payment security plans. The survey took place between Sept. 26 and Oct. 16, 2013, and the respondents work in various industries, including retail, CyberSource says.
Most executives in the study (60%) agree that fraud is more of a risk in their international operations than at home, according to the survey. In emerging markets, that risk has a large mobile component: 58% of respondents say they expect the rapid adoption of m-commerce in emerging markets to be the main driver of sales growth in those regions.
“Payment management has become a strategic enabler of business expansion and innovation, and as a business discipline is increasingly leveraged by senior decision makers,” says Simon Stokes, managing director of CyberSource in Europe, the Middle East and Africa.
Particularly in emerging markets, where more and more consumers are using mobile devices to access the web, retailers can adopt new strategies to mitigate security concerns, says James Hunt, associate principal in CyberSource’s managed risk services team. For one thing, using IP address information to verify a shopper’s location—a common and effective practice in monitoring fraud from PCs—is not as reliable on mobile devices, he says. That’s because when mobile devices are disconnected from Wi-Fi, their location appears as the mobile operator’s, he says, “which isn’t much help if you are attempting to confirm the owner’s location.” As an alternative, when possible, retailers can collect more precise GPS location data from a mobile device to confirm the owner’s location, he says.
Merchants should also adapt their fraud-screening rules to encompass mobile-specific behaviors, he says. For example, the peak buying times on tablets and smartphones are at night in many cases, compared with during business hours for PC-based transactions. So, rather than flagging all transactions with the same rules based on the time of day, a retailer should adjust its fraud-screening technology settings to scrutinize transactions differently based also on the type of device a shopper is using.