E-commerce and fraud go hand-in-hand. Both have boomed since the pandemic. What can organizations in APAC do to address these trends?

More consumers are conducting their daily lives online, whether it’s socializing or shopping. And this digital transformation, accelerated by the pandemic, is here to stay.

The latest e-Conomy Southeast Asia (SEA) Report by Google, Temasek, and Bain & Company revealed that South-east Asia now has 440 million internet users, 8 out of 10 of whom have shopped online at least once.

South-east Asia is expected to have US$174 billion in gross merchandise value (GMV) in 2021, up 49% from a year ago, with e-commerce driving most of the growth. E-commerce penetration in South-east Asia is projected to grow by 85% by the end of 2021.

How can businesses take full advantage of the online world, while managing the substantial risks associated with e-commerce? CybersecAsia discussed the trends and challenges we face in a digital economy fraught with online fraud and cybercrime with Rob Eleveld, CEO, Ekata.

E-commerce has boomed since the pandemic. What are the emerging e-commerce trends you see in APAC?

Eleveld: As more consumers shop online, their expectations have grown. They want greater flexibility in where they shop and how they pay. As a result, we’ve seen a number of trends emerge, including Buy Now, Pay Later (BNPL) options, single-click payments and integration of online retail stores with social media channels.

We’ve also seen increased interest in new payment methods, such as crypto. This is especially true of younger demographics, who are drawn to digital-first payment options.

As e-commerce and fraud go hand-in-hand, how do you see fraud evolving with the growth of e-commerce?

Eleveld: Along with a surge in e-commerce, we’ve also seen a rise in sophisticated fraud, such as synthetic identity and account takeover. Online payment fraud losses are expected to exceed $206 billion over the next five years and will be driven by identity fraud, according to Juniper Research.

Fraudsters are evolving their tactics, as more people shop online. Today, fraudsters are using advanced technology, such as automation and bots, making it challenging for retailers to identify genuine customers. For example, with synthetic identity theft, fraudsters can use real stolen personal information to create what appears to be a genuine-looking identity. This may pass standard fraud checks or validation on a single attribute. But this view is too narrow and can allow high-risk users to pass through undetected.

Effective identity verification analyzes multiple dynamic attributes, evaluating if they’re valid and linked to a genuine person. This approach provides a more comprehensive view of the person behind the application or transaction. As fraudsters become increasingly sophisticated, businesses need to analyze multiple identity elements in real-time, without adding friction to the customer experience.

What are the signs e-commerce players should watch out to recognize potential fraud/fraudulent transactions?

Eleveld: There are various signals that e-commerce players need to watch out for. Luckily, identity verification technology analyzes the following quickly, behind the scenes, and without adding friction to the customer experience:

• Suspicious IP addresses, such as when an IP address does not match the country of the shipping address
• Sudden spike in the number of orders from a new country (e.g., if you have never or rarely received an order from a specific country before but suddenly receive more than 15 in a week)
• Increased activity and orders during odd hours such as early morning or late night
• Inconsistent information provided by the user (e.g., same email address used for multiple orders with different phone numbers or names)
• Unusually large orders or multiple orders in a short amount of time that ship to different addresses

What are the top challenges you see being faced by e-commerce players in the region?

Eleveld: E-commerce players in the region are facing multiple challenges. It is becoming difficult to balance a seamless customer experience with an effective fraud management system. Most fraud management solutions implement additional verifications (like one-time use passwords) and manual reviews of a user to verify the customer is genuine. These additional steps create friction in a customer’s online shopping experience.

Connected intelligence and specifically digital identity verification are the key to unlocking a seamless experience for all new customers. It creates a highly predictive risk assessment filter, converting genuine customers quickly while introducing active step-up authentication only when necessary.

Customers from different countries also use different payment types and channels, and do not always provide the same personal details. For example, markets like Indonesia are mobile dominated, so consumers in Indonesia are more likely to use their mobile number for new account openings and transactions. It is important for e-commerce players to adapt to these market-specific customer behaviors and preferences. They also need to have robust fraud management systems in place that can fight fraud across markets, channels and payment types.

How can AI-enabled identity verification solutions help them fight these challenges?

AI-enabled identity verification solutions help e-commerce players streamline transaction authorization for good customers and reduce friction in their online shopping experience, while combating fraud.

Sophisticated identity verification looks beyond a single element, such as a phone number, and evaluates multiple ID elements, how those elements interact, and if they are linked to a genuine person. This holistic view of the customer helps businesses make more informed decisions.

As an example, Ekata’s identity verification solutions are powered by the Ekata Identity Engine, which combines sophisticated data science and machine learning to help businesses make quick and accurate risk decisions about their customers. Using such solutions, businesses can validate customers’ identities seamlessly and securely while preserving privacy.

Ekata works with various e-commerce players. Tell us more about how they are using Ekata’s digital identity solution to prevent fraud?

The Ekata Identity Engine applies sophisticated data science and machine learning to assess the validity of the identity information. The methodology analyses activity patterns, such as how long a customer’s identity elements (names, contact number, address, email & IP) have been in use and how they have been used in combination. This helps e-commerce players determine whether or not the identity elements shared are consistent with a genuine person conducting a transaction and that the consumer is who they say they are.

We help global and regional players fight fraud. A global fashion merchant slashed fraud by 50% and saved US$360,000/month by using Ekata’s solution for customer verification. Another global payment service provider increased transaction approvals by 18.6% and reduced chargebacks by 17.3% using Ekata.

With Ekata being a Mastercard company, how do Ekata solutions fit in with the rest of Mastercard services?

Today’s digital-first economy requires identity solutions that combat fraud while prioritizing the customer experience. By combining Ekata’s technology and Mastercard’s established reach, we are well positioned to empower our customers to navigate the digital economy today and in the future.

By adding Ekata solutions to its suite of services, Mastercard is able to enhance its user identification capabilities and provide a safer, seamless way for consumers to prove who they say they are in the new digital economy. Mastercard and Ekata’s integrated services will build on both companies’ commitments to ensure trust in the digital economy.