The fraud risk behind the potential of 3.4T USD cross-border e-commerce
The cross-border e-commerce trend has started since the end of 2017 and will continue to strengthen in 2019, especially after representatives of ASEAN countries signed a cross-border e-transaction policy agreement during the last November at the ASEAN Summit and Related Summit in Singapore.
Accenture, a technology and business consultant, estimates that there will be more than two billion e-shoppers transacting across borders with contributions reaching 13.5% of total global online retail consumption and market value reaching 3.4 trillion dollars by 2020.
What is cross-border e-commerce? It is an online international trade between a business (retail or brand) and consumers (B2C), between two businesses (B2B), or between individuals (C2C). For example, in Indonesia, there has been a popular phenomenon of ‘jastip’ (Entrusted Goods Shopping Service), which leverage social media and a few cross-border e-commerce, e.g. Lazada that sells imported Chinese products.
Transaction in a single country region is already prone to fraud risk, and it will be even more so if it is carried out between countries that were exposed to more risk factors. While it offers tremendous market opportunities, cross-border e-commerce definitely carries fraud risk.
The concept of cross-border fraud is no different from the common one, some examples of which include payment fraud, identity fraud, and counterfeit goods. It’s just that e-commerce requires a greater effort in mitigating fraud that occurs in cross-border trade because each country has a different market profile; among others are the potential number of markets, shopping behavior, public holidays, preferred payment methods and consumer protection policies. A different market profile means different potential fraud. Therefore, e-commerce should dig into the profile and understand the combination among the risk factors.
Even though a sophisticated online fraud prevention system may be applicable in a country, it was probably not applicable in other countries. Let’s say, a Chinese e-commerce company is running a protection system for credit card transaction in its origin country, but has it prepared the protection system for other alternative payment methods in the target country, for example, the Cash On Delivery (COD) method? As there are some countries where their consumers still prefer COD rather than credit cards, for example, Indonesia – according to the latest results of iPrice’s research which stated that 43 percent of e-commerce still preferred the alternative payment method.
Then, how can e-commerce decide what fraud mitigation methods are appropriate out of the combination of plethora risk factors in the target country?
The cross-border fraud mitigation approach that is considered most effective for foreign and complex markets is done by combining human and technological intelligence. This kind of solution is a fairly comprehensive, dynamic and data-driven decision.
Talking about technological intelligence, data is undeniably the lifeblood for every business in the digital era, including in mitigating the potential fraud. Artificial intelligence-based technology, machine learning, and predictive analysis help the analysts collect and process data of the risk factors into important information which later be used as a basis for reference in deciding the appropriate fraud mitigation efforts.