Conducting business internationally gives your company the opportunity to expand into new markets and increase profitability. According to DHL, reaching out to an international audience can help increase sales by 10 to 15%.
Going global also exposes your business to new risks and challenges. Before making the decision to sell products internationally, it’s important that you assess the risks and determine whether they’re worth it. Doing your research ahead of time will help you maximize your success while mitigating the dangers.
If you’re considering conducting business internationally, here are some things to keep in mind regarding international fraud:
What Should Merchants Know Before Doing International Business?
Before you start selling in another county, understand and be prepared to overcome the challenges you may face, including:
- Legal issues. Familiarize yourself with the laws of the country in which you plan to do business. Taxes, import duties and regulations on the types of goods sold will affect how you process transactions, and it may be significantly different from what you’re used to. Since overseas legal systems are dissimilar from those in the United States, you should retain a native lawyer who’s intimately familiar with the laws of that country.
- Language and culture barriers. Business dealings, contracts and customs don’t always translate well. Hire an expert translator who’s fluent in your native language and that of the country in which you’re doing business. He or she can also help you navigate the social situations you may encounter.
- Payment method preferences. In some countries, money transfers from bank accounts or cash on delivery is preferred over paying with credit cards.
- Product sales and data protection. Different countries have different expectations and legislation regarding product sales and data protection. To protect your business, become well-versed in how other countries respond to a misuse of personal data or a failure to keep such information secure.
What Are Some of the Riskiest Markets for International Fraud?
Fraud risk varies widely by country, but one way you can evaluate risk is by looking at the three factors that increase the likelihood of fraud: pressure, opportunity and rationalization. This interaction of personal circumstances, economic settings and societal expectations — commonly referred to as the “fraud triangle” — significantly affects the fraud rate in a location. Companies must account for these factors when evaluating the risk of engaging in international business.
Locations that have proven to be risky markets, offering fraudsters significant returns with minimal risk, include:
Visa and MasterCard report Indonesia as the second-worst country for credit card fraud. In fact, the country’s reputation for card fraud is so bad that consumers prefer to use payment methods other than credit cards, and many companies won’t process transactions that list Indonesian mailing addresses.
Credit card fraud losses in South Africa increased by 23% in 2014, and fraud continues to pose a significant threat to consumers there. False application fraud has dramatically increased, and card-not-present fraud continues to be a significant concern — contributing 42% of 2014’s total credit card gross fraud losses. Although South African banks are improving fraud prevention technologies, all South African consumers are encouraged to enable SMS notifications for their credit card transactions.
Because of the income inequality in Brazil, fraudsters can quickly compensate for several months of lost wages by perpetuating simple instances of high-value fraud. This income pressure, combined with the country’s economic instability, makes Brazilian credit card fraud levels among the highest in the world.
In addition, Brazilian law enforcement agencies lack the resources to investigate online fraud. When fraudsters see little risk of prosecution, they see ample opportunity for illegal financial gain. It’s clear the market is rife with fraudulent opportunities: 49% of Brazilian cardholders experienced card fraud in the past five years (compared with 30% globally).
Cybercriminals are common in Romania — stealing an estimated $1 billion yearly from Americans and their businesses. With smart students but few quality jobs, many have turned to cybercrime to improve their way of life.
How Can Merchants Be Successful in These Markets?
Conducting business on an international scale can be risky, but it also offers businesses the opportunity to grow. To be successful on a global scale, ensure you:
- Have the right data to perform fraud verification. You’ll need to understand the preferred local payment methods to make this happen.
- Understand the local economy and the common price point at which they’re buying. Make sure your product matches the needs and spending patterns of residents.
- Are wary of freight forwarders. All businesses want to save money in international shipping costs. But not all freight forwarders are reputable, and some may even hold your merchandise for ransom. Verify their legitimacy by ensuring they have authentic social media pages and websites, active blogs and global partner listings.
- Implement the appropriate fraud detection solutions. Your organization should implement comprehensive security strategies that can adapt to the nuances of different countries and tackle the challenges of e-commerce in high-fraud markets.
Grow Your Business by Safely Expanding Internationally
When your business is ready to go global, it’s important to remember that there are legitimate customers around the world who will be eager to help your business succeed. But there will also be fraudsters ready to take advantage of your international naiveté.
Merchants must understand that risk level varies widely worldwide, but fraudsters will take advantage of opportunities wherever they find them. However, with e-commerce transactions accounting for nearly 10% of total retail sales globally and growing, going global may not be an opportunity you want to pass up.
Before you leverage the power of the international market, apply cutting-edge fraud protection strategies that will help you mitigate your fraud risk while allowing valid international purchases.