How International Sales can Complicate E-commerce Security

Glen Goldstein SVP
Blog Post07/09/2018

Cross-border sales offer opportunity — and risk — for e-commerce companies

Two-thirds of the world’s purchasing power exists outside the U.S. There’s never been a stronger opportunity for e-commerce sites to profit from international sales. But with opportunity comes caution: Chargebacks911.com reports that orders placed from overseas with U.S. merchants are up to three times more likely to be fraudulent than domestic orders.

Identifying and prosecuting international fraudsters

More than 40% of retailers cite the potentially higher costs of fraud and non-payment as major obstacles to international sales, according to a European Union study. One issue is that companies struggle to adapt their screening rules to different consumer behaviors, payment methods and fraud patterns in different countries. Lack of consensus over how to effectively prosecute fraudsters across international borders further complicates matters. Moreover, merchants also are intimidated by the variety of privacy and data protection laws in each country.

Shopping cart abandonment and the foreign exchange market

High rates of shopping cart abandonment are another stumbling block, as buyers flustered by unclear currency exchange rates, unfamiliar payment methods, extra scrutiny prompted by security concerns, and questions on duties, taxes, customs, shipping and other hidden costs simply give up and look for local options.

Nearly 70% of global shoppers abandon their carts before completing their purchase, according to a Statista report. Forrester Research estimates that e-commerce companies lose $31 billion in revenue because customers click away.

Confusion over currency conversions can also lead to incidents of friendly fraud, where legitimate consumers initiate chargebacks that can be the result of an honest mistake. Friendly fraud accounts for more than 40% of merchants’ fraudulent losses.

Pursue international business opportunities with confidence

The world is full of opportunity for enterprising e-commerce sites, yet the risk of fraud associated with online international sales is real — and likely to grow as more companies realize the value of becoming players on the global stage.

Paying attention to warning signs is important, but it isn’t enough to completely block sophisticated fraudsters. Strenuous security checks on the checkout page might not be much better and can cause frustrated, good customers to abandon their carts.

Fraud solutions that understand different patterns of risk for different regions and evolve with emerging threats are vital. Equally important are security checks that run quickly and quietly in the background, so they don’t insult or annoy good customers.

Solutions that combine machine learning, advanced analytics and real-time data are key for merchants striving to experience more profits than headaches from cross-border transactions.

To learn more about advanced fraud detection solutions and machine learning, contact TransUnion by completing the form below.

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