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Expert opinion

When entering Chinese ecommerce, there is no substitute for local knowledge

Tuesday 22 September 2015 | 11:08 AM CET

Bill Zielke, Forter: To protect themselves, retailers must gain local knowledge and adapt to local preferences and patterns

In 2014 China became the world’s largest economy, and in June 2015 the country’s online population reached 668 million. Unsurprisingly, Chinese interest in ecommerce has been developing right alongside these trends. Recent events and concerns notwithstanding, there’s no denying the value of an online retail presence in China.

Chinese consumers show a strong interest in buying international goods, and this is something which can be particularly beneficial for US e-tailers. As The Paypers has reported, of the Chinese consumers who purchase outside of China, 84% buy from the US.

In line with a policy of increased economic openness, the Chinese government has been taking steps to make cross-border ecommerce easier for online retailers. Not only is full foreign ownership of ecommerce businesses now possible, but efforts are actually being made to make it easier through new regulations.

In addition, China has publicly announced its support for cross-border trade, signaling that this new and promising direction is based in a considered shift in policy, and is therefore something on which merchants can rely. Not surprisingly, many online retailers are eager to take advantage of this exciting opportunity.

Unfortunately, online criminals are pragmatic - they go where there is money to steal. As the Chinese economy and the value of Chinese ecommerce has grown, so has its appeal to fraudsters looking to exploit it for their own nefarious activities.

Between 2011 and 2014, online fraud cases increased dramatically in China, surging over 30%. As noted by The Paypers, in 2014 alone the financial losses caused by online fraud in China were estimated at over USD 1.57 billion. The more international online retailers become a part of the Chinese economy, the more they too will be affected by these losses.

To protect themselves effectively, retailers must prepare their fraud prevention just as they do the rest of their business: gain local knowledge, and adapt to local preferences and patterns.

In the same way that it is essential to understand the payments preferences of consumers in a new market, or the kinds of advertising likely to appeal, so too it is necessary to research fraudsters, fraud trends and fraud prevention tactics.

For example, smartphones and mobile commerce are notably more popular in Asia than they are in America, and this has an impact from a fraud perspective. As we said, fraudsters go where the money is. Indeed, a report conducted by Tencent has found that cybercriminals in China increasingly target mobile users. This means that e-tailers entering the Chinese market must assess their fraud prevention methods and adapt them where necessary to ensure their effectiveness in mobile commerce.

Similarly, many retailers find that monitoring fraudster forums provides invaluable insights into the techniques, culture and plans of the online fraudster community, all of which can be extremely helpful in preventing and guarding against attack. But companies can’t rely on knowledge gleaned from exclusively US forums to protect them outside the US; here again, a comprehensive local picture is vital.

Nonetheless, ecommerce merchants must retain their perspective. Fraud prevention should contribute to the company’s goals - which means welcoming new customers and encouraging growth in the new market. It’s all too tempting to guard against fraud by instituting stringent, risk-averse policies. But the consequence is the rejection of genuine customers along with fraudulent ones, which is precisely the opposite of what retailers want.

By paying close attention to the characteristics of Chinese consumers, both legitimate and otherwise, and their preferences, expectations and demands, retailers will be able to find a happy medium that will allow them both to prevent fraud and to provide an optimal customer experience for new buyers in the new market.

About Bill Zielke
Bill is an experienced ecommerce executive. Before joining Forter, Bill was a Senior Director and Head of eBay Motors. Prior to that, he helped bring numerous new products to market, notably in his roles as Head of PayPal NA Merchant Marketing, VP Merchant Marketing at Bill Me Later and VP Product at CheckFree. In the earlier days of his career, Bill served as a Senior Risk Advisor at JP Morgan Chase. Bill holds a Bachelor of Science degree from Transylvania University.

About Forter
Forter provides Decision as a Service fraud prevention for the challenges of modern ecommerce. Forter's solution is entirely automated, evaluating every transaction in real-time and providing an instant approval/rejection decision so that genuine customers are not even aware that they're being examined. The system works with behavioural analytics, cyber intelligence and elastic identity, and uses machine learning and the power of big data, informed and refined by the human understanding of highly trained analysts. Forter is so confident in the accuracy of its decisions that the company offers a chargeback guarantee, something that gives online retailers the peace of mind to leave fear behind and make the choices that are best for their business and its growth.

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