Fighting fraud on a global scale

The online doorway to world trade is wide open, and the potential rewards are huge. But when online retailers invite foreign customers over the threshold, they can also be putting out the welcome mat for fraudsters.

Businesses using the internet as the gateway to sell their wares in new countries are discovering that card fraud is a cross-border crime. Conmen using stolen or cloned cards work differently across sectors and nations, which means that the fraud prevention strategies that work in one country are ineffective in another.

Retailers can’t extrapolate fraud trends from one part of the world to another because there are differences in how criminals perpetrate fraud from country to country, and some of those differences are quite subtle. For example, retail thieves target different goods in each country, based on demand. They work out how quickly they can resell the item and how much it can fetch. Scam trends also travel fast. So a fraud prevention system that only looks for patterns detected in one geographic location will miss crucial methods of attack being used in other parts of the globe.

Take China, for example, where virtual characters that are created to play online games such as World of Warcraft are very popular with fraudsters and consumers alike. Criminals in Europe and North America prefer to focus on physical goods like gift cards, smartphones or the iPad—products in high demand that can be quickly re-sold, maximising the criminal’s profit.

Just as trends vary from country to country, so do the annual fraud levels that ReD constantly monitors. Statistics show that online payment fraud in the UK was down 10 percent to £239 million (approximately $389 million) in 2010, compared with 2009. In stark contrast, the US experienced a 157 percent rise from 2009 in attempted payment fraud, with the figure soaring to $ 5.8 billion (£3.57 billion) in 2010.

Given the variations in fraud patterns between countries, etailers selling across borders need a partner that is not just up to speed, but ahead of the game when it comes to the latest scams emerging globally across a wide variety of merchant categories. Ecommerce businesses that only focus on fraud in their own sector will not immediately spot a new ploy that criminals have used in another industry. The narrower the retailer’s perspective of fraud, the harder it becomes to keep pace with rapidly changing fraud techniques. It’s therefore important to use a fraud prevention provider that has access to a database of information pooled from every corner of the world and all types of business—encompassing retail, travel, telecommunications, banking and the petroleum industries—for the most effective protection.

Companies are reluctant to expand their business overseas because of concerns about fraud. But with the right protective shield, one that is both multidimensional and with a broad global perspective, etailers can get the reassurance they need to throw their business net wider—and so maximise their potential. A global overview of the ploys and tricks emerging across the planet, not just those on the doorstep, is crucial in thwarting card fraud.

Carl Clump is chief executive of Retail Decisions (ReD), a payment fraud prevention providers.