Héctor Cardenas
CEO & Co-Founder
Startup Contributor

The Role of Digital Payments in Securing Online Transactions

By Héctor Cárdenas | Wed, 09/14/2022 - 16:00

The enlargement of Mexico’s digital economy has been strongly influenced by the democratization of e-commerce, which represents around 5.8 percent of the total GDP of the country. Recognized as a trendsetter in Latin America and having substantial foreign direct investment, Mexico has become an attractive target for cybercrime. Furthermore, compared to the cybersecurity systems of leading economies, those in Mexico are still relatively weak. 

The backbone to consolidate our digital economy is the online commerce infrastructure. On a regional scale, Mexico is ranked second for most cyberattacks registered, just behind Brazil. At the local level, 31 percent of Mexican citizens feel unsafe buying online. Ensuring online security has become imperative to stop this problem from impacting the economy. In this context, what is the role that digital payments play and how can payment aggregators help strengthen the digital ecosystem with technological products based on a deep understanding of online payment security needs for both users and businesses?

In a market where e-commerce represented close to US$20 million in transactions in 2021 guaranteeing online transaction protection between customers and businesses is still a gap that needs to be closed. There has been an increase of more than 200 percent in e-commerce fraud since the pandemic began and, according to the latest study of online sales in Mexico, while user concern has decreased around the security of online shopping for fear of e-fraud, it remains one of the main worries regarding online shopping; in fact, 31 percent of offline shoppers still do not feel safe enough to buy online. The financial technology sector may play a critical role in delineating solutions that support the improvement of online transaction safety. 

One way to solve this problem is by facing threats, such as chargebacks, that impact business sustainability. Last year, at least 74 percent of Mexican companies faced chargebacks, with an average annual loss of up to US$500,000 due to unapproved payments. Additionally, in 2021, an average of 10,000 chargeback claims were made daily. With financial technology being implemented on a large scale, now more than ever, it is essential for fintech companies to protect companies by enabling the best infrastructure to boost productivity.

Payment aggregators are a well-proven solution. This component works as a third-party manager that processes merchants' online transactions while offering the necessary tools to reduce the risks of online fraud. One of the most compelling features is having the backup of machine learning processes and data. Conekta has developed the most robust proprietary antifraud technology based on artificial intelligence for Mexico that looks at 10 years of cards, cash and transfer transactions. It is an adaptive technology that tailors risk responses by industry, size and integration solution.

Such a service provider allows merchants to accept a wide variety of payments, whether it is credit card, debit card or e-wallet mainly. By implementing our Gateway technology for card transactions, we are able to increase card acceptance by 18 percent for online sales. The use of multi-acquiring solutions, which is the ability of a digital payment gateway to interact with several banking networks when processing a card payment, opens the door to implementing a recurring and secure payment system (tokenization) that enjoys a high percentage of approved transactions and increases the efficiency of digital collections. Payment aggregators also work as an extra layer of security to shield clients from chargebacks, increasing business competitiveness and preventing transaction losses.

With technology constantly shaping the fabric of our society, integrating mechanisms to increase online security has a direct and positive impact on the growth of digital economies. E-commerce already represents 5.8 percent of Mexico's GDP and as it continues to  expand, large companies that offer products and services online must protect transactions using technology-based solutions. This will help them to increase their competitiveness by offering a wide range of secure payment methods and by providing a good user experience to users while online shopping, in which the payment process is one of the most critical in the user journey; a bad user experience in which the payment is not processed correctly may result in a scenario where the user does not return to that e-commerce store or marketplace.

The integration of payment aggregator services is a bridge to achieve this and contribute to optimizing compatibility between new and preexisting technologies. In this way, it will be possible to unleash the potential of e-commerce as more people have access to the digital economy: the National Institute of Statistics and Geography (INEGI) forecasts that by 2026, around 118 million Mexicans will have access to the internet; currently, 88.6 million have this access. All this together will surely improve Mexico's competitiveness by making it an attractive country for the development of secure online businesses and efficient transactions.

Photo by:   Héctor Cardenas