Security & Fraud

How To Capture The Rising eCommerce Tide And Simultaneously Stem A Tidal Wave Of Fraud

It has often been said during the last several weeks that the world has seen several years’ worth of eCommerce innovations advance in about three months, due to the pressure and pivots created by the global health pandemic. What most people fail to appreciate, Payoneer Head of Enterprise Adam Cohen told PYMNTS in a recent interview, is how literally true that statement is. As much as it sounds like a colorful way of describing all the rapid progress, it fairly accurately captures what the trendlines have demonstrated of late, he said.

In the United States alone, he noted, the eCommerce penetration rate rose from about 17 percent to about 27 percent over the course of the eight weeks or so of stay-at-home orders. Before that, it had taken roughly 10 years to grow from 6 percent in 2009 to 16 percent in 2019.

 

But where there is a sudden influx of consumers, Cohen said, there are also rushes of fraudsters looking to capture new opportunities of ill-gotten gains. And the field of targets is richer and wider than ever, as merchants have expanded their digital presence to meet a new crop of consumers making their initial steps into online commerce.

“Consumers are buying online products that they didn’t buy online before. Perhaps more importantly, those who are now switching to online for the very first time are really making their first digital purchases ever,” he pointed out. “And these types of changes usually last after the end of whatever caused them in the first place, so we expect eCommerce to continue to benefit in the long term.”

The challenge is two-fold for retailers in a post-pandemic world, Cohen said. They must position themselves to capture the digital opportunity and simultaneously reinforce that position against the encroachment of an army of fraudsters.

Capturing The Rising Tide

The pandemic response, Cohen noted, hasn’t really created new trends so much as it has reinforced and dramatically sped up the movement toward digitization that was emerging well before March of this year. What the last few months have demonstrated, he said, is an influx of retailers and sellers that have suddenly realized the need to be much more digitally present and enabled. That has driven related explosions in marketplace businesses, which are suddenly surging with signups from players stepping into the digital realm for the first time – and upgrades to the service rosters of retailers all over the world.

By way of example, Cohen noted that pre-COVID-19, a large segment of Southeast Asian eCommerce had developed around the cultural norm of online orders with cash payments on delivery. Now, consumer preference is shifting toward digital payments.

Cash on delivery has proven to be very hard due to logistical challenges around COVID-19,” he said. “So now, our consumers are becoming much more open to cashless or digital payments. And we are seeing that consumers are activating online payment methods, shifting away from cash and accelerating digital payments adoption.”

Meanwhile, in Latin America, another place where digital transactions have until very recently lagged behind global averages, 13 million people made their first-ever online purchases in March alone, he said. People are going online to work, to shop, to stream entertainment and to seek education. And as entrepreneurs are rising up to meet those expanding need areas, Cohen said, they are suddenly finding their entire infrastructure needs upgraded to keep up with the growing demand.

“We’ve seen the platforms coming to us for help automating their payout processes, because their current setup isn’t scalable to the demand they are seeing. That’s been a very strong trend, and we’ve seen many platforms growing by over 50 percent in Q1 alone, and we expect them to continue to keep that momentum and scale in Q2 and Q3 as the pandemic is changing consumer behavior and lifestyle,” he said.

But navigating that growth means securing those transactions – something that is increasingly challenging as business floods online and finds itself beset by dedicated cybercriminals.

Meeting The Rising Challenges 

Where consumers go, fraudsters will always follow, Cohen said – and worldwide, Payoneer has seen a consistent uptick in attempts at fraud of various types. And those pressures have hit marketplaces particularly hard over the course of the pandemic, due to the inherent risks of the marketplace model, where the platform doesn’t fully control its sellers.

“Marketplaces are exposed to all kinds of risks from the supply side, which is to say the seller side. It can be what we would call hard fraud or more mundane issues, such as providing a low-quality experience, not delivering on time or delivering the wrong product,” he noted.

The sloppy merchant who simply builds a weak customer experience can be brand-damaging. The out-and-out fraudsters, who set up fake retail stores and send empty boxes, or nothing at all, can cause staggering financial losses and are very hard to battle back or dissuade, as hacking is a not a casual hobby for these people.

“We need to understand that the fraudulent seller runs a business, and these are professional fraudsters,” Cohen said. “They are very thoughtful, and they know all the tricks to getting away with fraud. So in a typical scenario, [they] set the infrastructure for a new store, such as an entity or VPN. They will then open a new store, sell on the marketplace and commit fraud – and the marketplace will end up shutting down their store. But then the cycle will repeat itself. They will open up another new store, and so on.”

Securing against the professional fraudsters, in Payoneer’s experience, doesn’t just mean shutting down a malicious merchant once, but also making sure they can’t keep setting up new shops across the web.

“What we do is pretty unique. We leveraged the seller’s behavior across our network in multiple marketplaces so we can identify when they move between them,” he explained. “And it also allows us to identify what seem like different stores and sellers, but in reality are the same entity. And we do this with our own store and account linkages to an ecosystem of stores and sellers, which allows us to establish the identity of the ultimate beneficiary who is really behind these stores.”

From where Payoneer sits, the future is digital for merchants, as consumers who have gone online are unlikely to go back. But the opportunity for eCommerce is only as strong as the ability to consistently deliver a seamless, swift and secure experience – and meeting that challenge is currently a work in progress across the web.

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PYMNTS STUDY: THE CROSS-BORDER MERCHANT FRICTION INDEX – JUNE 2020

The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.

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