Fraud Prevention Relies On Brand Protection: ClearSale

Q: How has online fraud in Mexico evolved in recent years? 

A: Fraud is a constant, what changes is the growth of e-commerce and the different strategies criminals use. In Mexico, fraud attempts within the e-commerce sector have grown annually by about 70% following the pandemic. 

E-commerce surged during the pandemic by between 80% and 90%. Afterward, e-commerce reverted to its traditional growth rate of about 25%-30%, resembling pre-pandemic levels. Despite this, criminal groups persist in using technology and tools to defraud businesses, focusing on acquiring card numbers and databases to carry out fraudulent activities. 

Q: What new strategies are fraudsters using and how does ClearSale help its clients address them?

A:  Criminals are constantly evolving their tactics to initiate fraud. This evolution is evident in the growing number of players attempting to fight such crimes. ClearSale regularly tracks new methods used by fraudsters. A prevalent strategy involves the use of brand copycats, in which fraudsters send ads claiming to possess exclusive coupons but request a deposit before sending the product. This type of fraud is hard to identify.

The dynamic nature of fraudster strategies complicates prevention. To tackle this challenge, technology and data companies like ClearSale must develop more robust models for product descriptions and device fingerprinting. These models help to identify devices and patterns, allowing for more effective fraud prevention. Innovation is crucial because fraudsters operate at a pace that often exceeds the capabilities of in-house fraud management teams, which may lack the time, expertise, or focus required to keep up with these dynamic challenges.

Q: What challenges do e-commerce companies face in Mexico when dealing with fraud? How does ClearSale address these challenges? 

A: Some of the most common issues companies in Mexico face are friendly fraud and the rapidly evolving and dynamic tactics used by criminal groups. As an anti-fraud solution, ClearSale processes hundreds of thousands of transactions each month and we have observed that many fraudulent transactions, especially those involving stolen cards, originate from phishing activities. Criminal groups not only commit fraud but also devise strategies to gather card information and confidential data from cardholders. 

ClearSale has addressed this challenge by developing a brand-focused solution that identifies threats at their source by proactively detecting and taking down fraudulent pages, apps, and fake social media profiles. These fraudulent entities steal cardholder information through impersonation, using the data to commit fraud against e-commerce businesses. Our focus is to find the root cause of fraud before card information and confidential data can be stolen. This way, e-commerce clients are safeguarded from the potential consequences of fraud, such as chargebacks resulting from friendly fraud or stolen card information.

Q: How do ClearSale’s brand protection solutions help its clients? 

A: ClearSale's brand protection solutions help clients protect themselves against two primary fraud schemes. The first involves the theft of cardholder information that fraudsters use to make purchases. This mode of fraud is hard to identify by fraud prevention companies, given the use of authentic personal details. The second scheme revolves around the sale of counterfeit products, which results in substantial financial losses for businesses.

ClearSale's Brand Protection addresses these challenges by collaborating with brands. This service is tailored specifically for brands and businesses, aiming to protect them from the detrimental impacts of brand impersonation and counterfeit sales. We scan both the visible web and the deep web to detect brand impersonation. We identify websites, social media profiles, advertisements on platforms like Google, and even fake apps that sell counterfeit products. We also look for fake listings on marketplaces such as Amazon and Mercado Libre. The tool acts as a scanner, actively searching for the brand name and logos. Upon identification, ClearSale notifies the respective business, providing details about newly discovered pages, social media profiles, applications, or Google ads. However, ClearSale cannot take down sites, apps, or social media profiles without the explicit authorization of the brand. 

Q: How high is the demand for brand protection as a strategy for fraud prevention? 

A: Demand for brand protection from fraud prevention is not widespread, largely due to a significant lack of awareness. This is gradually changing, especially in the e-commerce sector. Continuous communication with companies, brands, and e-commerce directors reveals a prevailing lack of knowledge, highlighting the deficiency in preventive culture.

Brand protection is a proactive endeavor. The challenge is substantial, with hundreds of thousands of websites being created every minute. The danger is not confined to large-scale criminal organizations; even individuals can pose a significant threat. Facebook alone harbors a billion fake profiles. Creating a false brand profile on social media platforms is easily accomplished, leading to customer confusion and a considerable loss for brands. 

Another concern is the prevalence of false advertisements. Clicking on these ads can lead to substantial financial losses. The total cost of fraud due to false advertisements reached a staggering US$61 billion in 2022.

Q: What changes have you seen in customer behavior and how do they influence a brand’s approach to fraud prevention?

A: Consumers are becoming more technologically savvy and are more technologically aware. They explore products online and then try them out in brick-and-mortar stores, actively seeking the best offers. As users are more inclined to interact directly with brands and not in marketplaces, brands now have to prioritize their brand protection to avoid a mirror site where customers may encounter counterfeit products. Ultimately, the challenge for brands and e-commerce platforms is to provide a holistic and integrated experience for the buyer, while being aware of possible fraud strategies targeting them, which ClearSale helps with.

Q: Why is online fraud rising in Mexico? 

A: Fraud prevention focuses primarily on two factors: the amount of data available and the depth of understanding of the market dynamics. The effectiveness of prevention strategies is greatly influenced by the size of the database, which enables the construction of statistical risk models. The surge in online fraud in Mexico can be attributed to the increasing availability of sophisticated tools in the Latin American market, the growth of e-commerce, and Latin American ingenuity and social complexity. Many fraud prevention solutions originating from the European Union and the United States view fraud through the lens of those regions. Fraud in Latin America differs significantly from fraud in developed nations. Latin America introduces a unique complexity rooted in social differences, as the region grapples with social complexities that necessitate careful consideration. 

Questions arise about how to handle transactions from individuals in marginalized communities without perpetuating unfair discrimination. Efforts are being made to leverage tools like AI and machine learning and there is a push to incorporate facial recognition for user verification. However, the complexity persists due to regulatory and data protection challenges in the region. 

Q: What are ClearSale's primary goals and objectives for the end of 2023 and 2024, especially in the context of expanding its presence in Mexico? 

A: In Mexico, our goal is to increase our client portfolio, which comprises about 300 clients. We have consistently seen double-digit growth during the past few years and we want to maintain that pace. We continue to introduce innovative tools across new channels, allowing for more dynamic approaches to fighting fraud. For example, the integration of facial recognition is a pivotal aspect of our innovation but we recognize that it may not be applicable to all users. Leveraging technology and statistical models, our objective is to determine and minimize friction, ensuring the smoothest experience for the maximum number of users.

The benefit of our anti-fraud tool lies in its flexibility. We do not enforce a 100% facial recognition requirement, as it could create a cumbersome navigation experience. Instead, we consider selectively applying facial recognition to users with certain risk levels, striking a balance between security and user convenience. Our overarching goals revolve around two key aspects: sustaining year-over-year growth and driving innovation in fraud prevention methods.

ClearSale, with over 20 years of experience, is one of the world's largest fraud management and chargeback protection services companies. Its goal is to help its clients prevent fraud while helping to improve customer experience.