Bordering on Insanity: The Case for Taking Caution Against Blocking Orders From Mexico

One of the most allure aspects of ecommerce is the ability to sell to a whole planet of customers. A borderless storefront should mean limitless growth, right?

Unfortunately, the allure of growth into international markets is commonly stymied by the fear of increased fraud risk. When some countries are perceived (fairly or not) as being high risk for card not present (CNP) fraud, many online merchants will trim their own wings and not sell aboard out of fear of profit-depleting chargebacks. Think of it as a sort of ecommerce collective punishment: a categorial policy of declining all orders from a given country punishes the many legitimate shoppers for the fraud of a few, but by turning away lots of good business, etailers hemorrhage revenue and stunt their own growth.

Few countries highlight this dilemma more than Mexico. Far more than just margaritas and maquiladoras, Mexico is projected to generate $65 billion dollars of ecommerce revenue by 2020, fueled by a growing middle class and twice as many internet users as the entire population of Australia. Yet, many ecommerce companies refuse to accept any Mexican orders, acting out of an oversized fear of its higher average fraud risk rate. But sacrificing so much good revenue because of a single data point which itself is a generalization of an entire nation is both unwise and unnecessary.

Wise fraud management, including both skilled analysts for manual order review and best-of-breed automated fraud protection for ecommerce solutions, can allow online merchants of all sizes to take advantage of the enormous growth opportunity which awaits them in Mexico.

Mexico’s CNP fraud risk is manageable with the right tools. Let’s take a moment to explain why putting an entire country on an ecommerce blacklist isn’t the right move.

Bad Marks for Blacklists

Like all other blunt instruments used against fraud, country-wide blacklists turn away far more good orders than bad ones, because these tools can’t simultaneously consider all the relevant data needed to piece together the story behind each order…stories which are overwhelmingly about legitimate shoppers.

For example, when American citizens of Mexican descent visit Mexico (such as to visit family) and make online purchases during their trip, those orders will have a Mexican IP address, sometimes a US credit card and an American shipping address. Ditto for college students spending Spring Break at Rocky Point. Instead of a blanket rule of declining all orders originating in Mexico, look more at the email address, specifically the sending domain and the age of the account (those college students would be using either their school account or a personal one they’ve had for a while).

And it’s not just visitors to Mexico whose orders are generally safe. Regular orders from Mexicans themselves can be almost always approved. This is true even though the percentage of transaction value reported as fraudulent for Mexican orders was over twice that of the United States, according to a whitepaper from Experian. Even though that statistic sounds frightening, Mexico’s fraud rate in absolute terms is only 1.31%, and while that is higher than the U.S. average of 0.5%, so is the fraud rate of the Netherlands (0.8%) and France (0.74%). Would you cut off the Dutch and French because of it?

Regardless of where in the world an order originates from, one of the best questions to ask is, “Is this a repeating customer?” Orders from customers who have previously purchased from a brand without chargebacks can be safely approved almost every single time.

Analysis, not paralysis

Country-level fraud risk scores from third part data sources can obscure very safe segments in that country in much the same way an average of any data set can hide significant outliers. When it comes to cross-border ecommerce (and those from Mexico in particular), managing risk requires much more fine-grained data and better – and more holistic – overall analysis. The takeaway: reconstruct the story instead of comparing to a threshold.

By doing so you’ll construct another story: one of your brand’s success. While it’s truly foolish to throw good money after bad, in ecommerce it’s delusional to throw away good money due to false declines. Much better to manage the risk and maximize the revenue.

 Chloe Marchbank  is a Freelance Writer

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