Payments fraud doesn't begin and end with stolen credit cards. There are sophisticated international networks of criminals who dedicate their entire lives to scheming and scamming merchants and consumers for every cent that they can extract. But there are also experts in the payments fraud field who are actively fighting back. True Fraud features real-life stories of the battles that are raging across the world, one transaction at a time.
Hey. I'm Pablo Torres, and this is True Fraud. This special episode is part of our latest mini series diving into the fraud patterns in different countries that are important to you as a global ecommerce business. Make sure to subscribe so you don't miss the next country deep dive.
Pablo Torres:Ecommerce fraud patterns change geographically because of the access to technology, the access to information, the financial, status of the country, the the education level of the people in them, so when you think of population in Europe, for example, there might be a higher level of education, more people with master's degrees or, you know, you name it.
Pablo Torres:And when you think of Latin America, there's less technology penetration, there's less easy access to technology, there's less knowledge on on that end, right? So that that really kind of paints a different picture as to how you're gonna approach your activity, like your fraudulent activity when when you're kind of going into that market. And so, initially, for example, when you when you're thinking of Europe, there's gonna be probably more ways, for you to sell something that you got, online using stolen credit cards, and you're gonna be reselling it online. Whereas in Latin America, there's gonna be a lot more street markets. There's gonna be a lot of, what they call informal commerce, which is all of these businesses that are not registered, that are not paying taxes, you know, it's just your kind of mom and and dad shop out in the corner, you know, or, like, they set up once a week with a bunch of other shops, and they take over a street, and and that's where you find all of this stuff.
Pablo Torres:The profile of the country in Argentina, specifically, as things have been changing so much since the early 2000s. There's been a lot of political, a lot of economical turmoil, which has really changed the way that the the finances, I guess, of of the people that live there and the way that they manage them. And so when you can think of, you know, the the normal way that you would perform ecommerce or that you would go and buy something online in any other country. You grab your credit card, you go and buy something really quick, and then you get it shipped and, you know, that's it. However, in Argentina, because of the way that things have been happening there, it's becoming more of a cash economy.
Pablo Torres:Right? There's, there's huge devaluations that happen within hours, and so when you have your money in in your bank account and suddenly you hit, like, a 500% devaluation of of the Argentinian peso, then you're losing all your money. And so, you know, maybe you had at some point 500 USD equivalent to Argentinian peso, and then by the end of the day, you have $2. And so nobody is putting their money in the bank. Nobody is using credit cards because of the same reason.
Pablo Torres:Right? How can you pay these interest rates that are so variable, that are moving up and down all the all the time? And so when you think about all these people that are keeping their cash in hand and then on top of that, the devaluation, then people are gonna start moving into a more steady currency, which is the US dollar. And so when you start thinking of people using US dollars in the country, then, you know, you're moving into, an economy that is not only cash, but it's only moving into a different currency. And so, you know, if you don't know what you're doing with ecommerce with with your site, you're gonna be accepting Argentinian peso, and nobody's gonna be buying with that.
Pablo Torres:Everyone's gonna try to use VPNs so so that they can localize the currency to the US so they can use those those dollars. On top of that, of course, because now the economy is so based in the US in the US dollar, the government doesn't want that money to leave the country. So there's restrictions. At some point, they were restricting how many items you could you could buy in a year. They were restricting how much merchandise companies could bring from outside of the country into Argentina, you know.
Pablo Torres:And so all of this really changes as the the way that people are gonna be, committing fraud online. So if people are not gonna be using credit cards, for example, then you as a business owner, you know, who is running e commerce in Argentina, then you need to find the option of, okay, what other payment methods can I use so that people can buy online? And so there's, you know, TotalPago, Pago Facio, there's link, there's all of these, kind of, like, offline payment methods. But even then, the you might not see a lot of activity there because of these restrictions. And so when you can only buy 1 or 2 items, as I mentioned, you know, a a few years ago, where you could you had a limitation as to how many items you could buy online, then suddenly you have groups of people that would get together and say, hey.
Pablo Torres:How about I buy your limit so that I can buy more stuff online? I've already used my limit by, buying a TV. I bought, you know, a table. I bought something else, and that was it. But I still wanna buy something else, so there's people that are willing to sell those limits to somebody else.
Pablo Torres:And then you start seeing transactions that don't look very normal. You know, it it would look like somebody that's using somebody else's credit card with somebody else's address with somebody else's name. And it's because then these groups come together, and they're using those limits. Right? And so it's the same the same situation is happening right now where there's people that can't even afford buying these things online.
Pablo Torres:And so the demand for all of these items that can't enter the country anymore, increases. And when you're going into, an economic crisis, when you're hitting, the valuation where, you know, like, the the your currency is is dropping by 500% in a day, then people can't have access to these things. And so suddenly there's a higher demand for for all of these items, you know. There's there's people that need to continue their lives and continue their lifestyles. So there's gonna be more access to or more people trying to gather these items in, in the least illicit way.
Pablo Torres:And so you you'll start seeing, for example, a lot more people who are gonna be relying on either credit cards because they don't have the money, or, they're gonna be buying credit cards online, and they're gonna be be using that information to get those items. Now because there's a lot of, a lot of these restrictions that I mentioned, then the country and the the issuing banks will start failing a lot of those transactions. Right? There's gonna be more restrictions as to, you know, how much money you can use in a month, how much money you can use on a single purchase. And then on top of that, if you don't have the the the funds to to buy those things, then people start moving into those areas where they can, you know, commit fraud, which is not heavily pursued in in a lot of these countries.
Pablo Torres:You know, it's kind of like if if you go to the Argentinian police and you tell them, hey. Somebody committed fraud for a $1,000 or I can go and pursue somebody that killed somebody, then they're gonna say, you know what? The bank will take care of that. I'm gonna go for the bad guys. And so all of that just kind of paints a very different, picture within the country.
Pablo Torres:And then you start seeing a lot of cross border activity as well. Because a lot of these people, instead of buying with Argentinian credit cards, they'll start buying with Chilean credit cards or Bolivian, credit cards. And so all of that money so that the the US dollars don't leave Argentina because they're using credit cards from other countries. And then they'll go and pick up those items, and there's a lot more cross border smuggling and, you know, that sort of, activity developing in those countries. It's not uncommon to to hear about, you know, big trucks getting stopped at the border in between Chile and Argentina because, you know, they had a bunch of items that weren't, registered for to enter the country In Argentina, there's a lot of these, street markets.
Pablo Torres:You know, they'll be selling some of these items that are so easy to collect. On top of it, a lot of the the activity that you're gonna see from one of these like, so from from these merchants is they're likely not gonna go for a merchant that sells, you know, a camera that's $5,000 versus a merchant that sells iPhone cases. Right? Somebody that something that gives you kind of that relief in your life when you're feeling like, you know, things are kind of bad around me, but I can afford to buy myself a new iPhone case, you know, and it's gonna make me feel like, okay, life somehow it's still balanced. That's what they're going to go for because that's the easy sells.
Pablo Torres:You're not going to be able to if the economy is bad, you're not going to be able to sell a $5,000 camera even if you sold it for cheap. Right? Cross border brands, companies, they can protect themselves from online fraud by doing their research. You know? The due diligence is just so important when you're going into new markets.
Pablo Torres:Going into a new country where all you know is the currency is is kind of like shooting yourself in the foot. You know? Knowing the alternative payment methods, knowing the political situation, knowing the financial situation, knowing the the the customs of of the the place, anything that gives you a little bit more information about the the country is is so important. If you're if you're going to, you know, specifically talking about Latin America being one of kind of the biggest new markets that are coming up for for e commerce, going into those into those countries, thinking that everyone uses credit cards like in North America is it's a very, ignorant approach. So you need to you need to learn a little bit about the the history of the country.
Pablo Torres:You need to learn about the people and the way that they behave. And when you look at that picture, then you get a better idea of what you can expect.
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