Online retailers reject two and a half times as many cross-border orders as domestic orders, according to the latest ThreatMetrix report on digital fraud, but it may be unnecessary for e-commerce players to deny so many cross-border transactions. Although merchants tend to assume that international orders carry more fraud risk than domestic orders, the data doesn’t always bear that out. In fact, merchants who block orders based on country of origin can lose legitimate sales and potential growth while suffering costly instances of domestic fraud. Understanding the relationship of location to fraud risk can help merchants approve more valid orders and reject more fraudulent ones, regardless of location.
Country-level geo-blocking is a common but overbroad risk-reduction practice many online retailers use. In fact, in the EU, as many as one-third of online sales are blocked due to the shopper’s country of origin, something the European Commission hopes to change. Apart from the discriminatory aspects, country-level geo-blocking may cost merchants more than it saves them because some countries regarded as high-risk by online sellers have comparatively low rates of attempted fraud, depending on the product category in question.
A good example comes from Chinese luxury consumers, who have high legitimate transaction rates, a preference [to continue reading please click here].