Amal Ahmed, Director at Signifyd, the e-commerce fraud protection platform, discusses the complexities of cross-border payment fraud, and the best strategies for global business expansion in 2024 and beyond.
Introduction: The dual edge of global expansion
In the ever-evolving landscape of global business, companies are increasingly looking towards international expansion for growth. However, this journey isn’t without its challenges, notably in managing cross-border payment fraud.
Understanding cross-border payment fraud
What is cross-border payment fraud?
Cross-border payment fraud is the term given towards fraudulent activities that can occur across multiple channels or platforms that reach across national boundaries. It also involves the use of various payment methods, accounts or identities. Targeting vulnerabilities within interconnected ecosystems of online and offline channels. From 2006 to 2011, the US experienced 500,000 cases in which consumers had made transactions of more than US$1.4 billion towards foreign businesses.
Fraudulent activity such as money laundering, terrorist financing and cybercrime bring significant risks to businesses and financial institutions involved in the cross-border payment. Scammers have become more sophisticated in their tactics, as they exploit weaknesses within the connections between businesses and customers by using third-party payment processors and digital currency to evade detection. The results of these not only bring economic consequences, but also legal and regulatory consequences that dramatically impact the reputations of the businesses and financial institutions involved in cross-border payments.
The consequences of cross-border payments
Cross-border payment fraud can bring significant consequences to businesses, their customers and financial institutions such as:
- Financial losses – Cross border payment fraud can result in severe financial losses to customers, business and financial institution. They can typically lead to chargebacks, account takeovers and unauthorised transactions, resulting in detrimental losses.
- Reputational damage – Cross-border payment fraud can devalue the reputation of businesses and financial institute as customers become subject to them, it can shred the loyalty that customer has towards the company.
- Reduces business opportunities – Cross-border payment fraud can cause businesses to lose opportunities with other businesses and financial institutions. A company that has become a victim of fraud, can see potential clients and partners feeling vulnerable within the payment systems.
- Personal and financial data breaches – Cross-border payment fraud can cause personal and financial data being leaked, exploiting private customer information to third parties that can lead to identity theft, financial losses and other forms of fraud.
- Non-compliance with regulations – Cross-border payment fraud can lead to regulations and laws being broken leading to further costs for fines, legal frees and more damage to businesses and financial institutions.
The rise in fraud costs
Global CNP fraud has been escalating, with projections indicating a rise to £34.076 billion by 2027. This trend points towards the need for more vigilant fraud management strategies as businesses venture into new markets.
Regional fraud profiles: A closer look
North America: Synthetic identity fraud
North America has witnessed a substantial increase in fraud, especially in the form of synthetic identities. Businesses expanding here must focus on digital identity verification and transaction risk evaluation to combat this trend effectively.
Europe: Innovation in fraud
The COVID-19 pandemic saw Europe’s fraud landscape evolve, with account creation and login points becoming increasingly vulnerable. Here, innovative fraud solutions capable of detecting anomalies in real-time are essential.
China: Account takeover frauds
China’s rapid e-commerce growth has left gaps in fraud prevention, particularly in account takeovers. Building a comprehensive data pool for transactions is vital for businesses to secure their operations against such vulnerabilities.
Latin America: Understanding buyer profiles
With a significant increase in e-commerce sales, Latin America also faces high rates of transaction fraud. Understanding buyer behaviour in this region is crucial for developing effective fraud protection strategies.
Mitigating international expansion risks
The importance of fraud familiarisation
Businesses need to familiarise themselves with the specific fraud challenges of the markets they are entering. Utilising existing data to build fraud profiles and match them with appropriate fraud solutions is critical.
Leveraging Machine Learning and automation
Machine Learning and automation play a crucial role in identifying fraudulent activities. These technologies can process vast amounts of transaction data to flag potential frauds while approving legitimate transactions.
The role of data in fraud prevention
Consumer behaviour analysis
Analysing consumer behaviour data is vital in developing a comprehensive understanding of regional shopping patterns. This information helps tailor fraud protection measures to specific market dynamics.
Building robust fraud solution tools
Implementing robust fraud solution tools that can adapt to different regional challenges is key. These tools should be capable of detecting and preventing a wide range of fraudulent activities, ensuring business security.
Conclusion: Navigating the complex world of global business
As businesses venture into new international markets, understanding and preparing for the unique fraud challenges of each region is paramount. By implementing advanced fraud detection solutions and leveraging data analytics, companies can safeguard their operations, optimise revenue and thrive in the global market.
Click below to share this article