Fostering Mexico’s E-Commerce Boom
STORY INLINE POST
Q: What brought Signifyd to Mexico prior to the e-commerce boom and how has the company seen this market evolve?
A: Aside from having one of the fastest-growing e-commerce sectors in the world, Signifyd chose to establish its Latin American headquarters in Mexico because it serves as a regionally strategic gateway to the entire market. While Signifyd aims to expand throughout the region, the company understands it must focus on cultivating its reputation and increasing its market share in the region’s largest markets: Mexico and Brazil.
Since our arrival in Mexico last year, we have seen a constant flow of new users migrate toward e-commerce platforms, prompted by the continuation of the COVID-19 pandemic. This observed trend makes our work particularly essential in a cash-loving market, in which nearly 40 million people remain unbanked and lack a digital footprint. Nevertheless, Mexico gained about 3.5 million internet users between 2020 and 2021. Although this represents a great market opportunity for e-commerce companies, fear of fraud schemes has constrained their willingness to engage these new users. This ambivalence on behalf of companies and consumers alike has handicapped the potential growth of this market sector. Recognizing that uncertainty was the main inhibitor, Signifyd uses artificial intelligence, data and machine learning to remove this barrier, a business strategy that has increased total sales for our clients by 5-15 percent annually.
Q: What indicators does Signifyd look for when evaluating transactions and where is this data sourced from?
A: Using the data generated from our network of more than 10,000 merchants across the globe, we evaluate in real time over 1,500 indicators beyond an individual's digital print, such as email, mobile phone number and credit card. The system also cross-references location and online behavior prior to the transaction. Moreover, since Signifyd does not store or build consumer profiles, the company is able to bypass what organizations may consider to be red flags, such as a different phone number. Overall, shortening this verification process to a matter of milliseconds helps reduce friction at checkout, which prevents cart abandonment, increases total sales and improves customer retention in comparison to companies that still do manual reviews, which can be a largely inefficient process.
Q: Has Signifyd noticed an uptick in fraud schemes over the past two years?
A: Definitely. As the e-commerce market experiences one of its greatest periods of accelerated growth, we have noticed an uptick in fraud schemes that have become increasingly sophisticated. Another consideration for merchants is the proliferation of e-commerce channels, such as web, mobile, store pick-up, kiosks and others, each afflicted with their own fraud pattern. In other words, while the omnichannel experience is helpful for consumer outreach, it has increased the risk surface for merchants, resulting in increases in fraud pressure of up to 200 percent when compared to pre-pandemic levels. Account takeover is one of the most utilized fraud schemes at the moment, having grown an estimated 239 percent just in the first half of 2021, year-over-year—an unnecessary risk when Signifyd has the technology to mitigate it.
Q: Fraud protection has been touted as beneficial for client attraction and retention. How else can merchants benefit ?
A: Based on the conversations we have had with merchants in Latin America, the cost of fraud remains largely unstudied and underestimated. By that account, it should come as no surprise that Latin America has one of the highest rates of fraud in the world, accounting for at least 2 percent of all transactions. To bring this rate down, companies in Latin America first need to understand that the cost of fraud goes beyond the purchase price of the product, given that it includes hidden costs for the company, such as storage, processing and shipping. This represents a direct impact on merchant profitability, which in turn has prompted companies to become risk averse and turn down sound transactions. Another cost that goes largely unperceived is customer experience. For example, by the time a consumer visits a merchant's page, they are likely ready to purchase. If their transaction is declined on their first visit, they are likely to never return to the platform.
To avoid the costs hidden at both ends, Signifyd recommends that merchants understand the cost of fraud they are incurring and where their transaction approval rate stands.
Q: What objectives does Signifyd have for the year and how does it plan to continue supporting e-commerce growth in Mexico?
A: Signifyd has built a strong team in the region, bringing in local talent specifically to inform regional operations and enrich the company’s performance. Tasking regional talent to lead company projects such as intelligence analysis, data science, product engineering and marketing was a common-sense decision for the company and we believe it is what enabled Signifyd to successfully refine its product market fit in just a little over a year. With these fundamental business foundations established, Signifyd can focus on helping merchants with the aforementioned challenges, increase market penetration in Mexico and Brazil, and begin formulating expansion strategies into new markets in the region.