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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 miniseries, 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. Mexico has been, you know, being one of the the biggest countries in Latin America and being one of those up up and coming markets, for ecommerce.
Pablo Torres:It's so important to talk about the fraud that's happening there. Mexico, when you think about it, it's kind of the filter for North America, right? Everything that's coming from South America into the states or into Canada, it has to make it through Mexico. When you think about Mexico the first thing that probably comes to mind is the cartels, right? And so the cartels, yes while the the majority of their businesses, drugs and you know all of that, they're also diversifying their their activity.
Pablo Torres:There's the the access to technology is greater than than it was, you know, 5, 6 years ago. More people are moving into cities. Everyone wants kind of that American lifestyle too. So everyone is looking for those kind of like your 9 to 5 job. There's a lot more people that are pursuing that, you know, like your perfect picture of what your life could look like making money.
Pablo Torres:Right? And so because of that then you have a lot of people that are moving into these places, these areas where the economy doesn't support them and then they start kind of moving into, well, what am I gonna do now? And so the activity that these these organized, criminal groups are offering to these people is, hey, you can make a little bit of cash, you know, and and there there's this whole this whole glamour around being part of the cartel or being part of a a an organized group. When you look at, you know, the the culture in Mexico, it's it's almost it's not frowned upon to to be part of this sort of activity. It's it's kind of kind of cool, you know.
Pablo Torres:So there's there's a lot of people that are actually moving into cities looking for that specifically. And so when you have a lot of people moving and and flocking into into these areas, then you're gonna have other groups trying to either follow with the same, activity that that these organized groups are doing or they're gonna try to find their own their own spin. Right? And so in the last few years we have seen groups, getting larger and larger. It it's not as common as it used to be to to find groups or, like, find this activity that's being run by 1 or 2 people.
Pablo Torres:Also, when you think about the the proximity with, the North American market, then it gives us an idea of, the type of technology that that it's, that is accessible in the country. And so there's more technology, there's more information, there's more people that are willing to to go in and and do the work. There's more education, so there's more people that are tech savvy. There's more interesting and and more complicated patterns. And, you know, as as we mentioned with with Brazil then these groups are kind of moving into getting educated to be able to to get through all of the controls that all of these companies have.
Pablo Torres:And then on top of that, you know, when you when you're looking at, what people are trying to buy then it it's gonna be items that are gonna mimic the culture of North America, of of the US or Canada. So, you know, it might be 20 degrees outside, but everyone wants to wear a parka that's, whatever Goose company is, you know, because that gives you status. And so there's gonna be a demand for all of these items that people can't really afford on the websites, but when you go and buy it in the black market, then, you know, you can buy it there for for a more affordable affordable price. While the culture in in the country has been the this informal, commerce for all of these street markets. This same access to technology and and all of these new generations, everyone is buying online now there too.
Pablo Torres:And so you have kind of like a mix of both ends. Right? You have the people that are still going to the market because it's kind of like a fun thing to do on Sunday, and you get a few things from there, but if you're looking for something specific you might go and buy it online. And so there's more and more marketplaces in in, in Mexico where you can buy a lot of this stuff. And actually what a lot of these people do is without before they even spend the money, that before they even try with a a stolen credit card, they'll sell it to somebody on these marketplaces and then they'll go and buy it with a stolen credit card, and so that they're not losing money.
Pablo Torres:Right? You know, all of the the the activity, the the credit cards that are being used there are are very much for from within the country. Like, you're not gonna see a lot of, cross border, credit cards being used there unless you're kind of in the northern part of the country, then you'll see, you know, every once in a while, a US issued credit card. Why why do they use more Mexican credit cards? While it is easy to find them online, there's also it's it's super easy for people to just go and, you know, pay $50 to the guy that helps you pump gas at at the gas station.
Pablo Torres:And because they handle the transaction, they normally skim your credit card right there or even at restaurants. You, you know, you might be talking to them, you don't even realize it, they just skimmed your your credit card. And so it is it is so common to see or to hear about people that that know exactly where the credit card got skimmed, and it's because of that. Right? It's it's such a common practice.
Pablo Torres:And and the banks know know it as well, you know? And it's it's very interesting to see the the response from the banks, whenever they're dealing with with situations like that. And so that also affects maybe a little bit of the fraud, spectrum of of, the the usage of credit cards there, but when you're looking at authorization rates in Mexico, they're gonna be much lower for that same reason because the banks are dealing with a lot of fraud and it's a lot of transactions that also look very legitimate. They still, you know, maybe they don't have the either the the experience, the bank doesn't want to deal with the risk, or knowing that maybe this person has never bought anything on this website before then they're just gonna decline the transaction. And so the the understanding of of a lot of merchants when they're going into these markets, talking specifically about Mexico, is that you should expect a much lower authorization rate.
Pablo Torres:Your success rate may not be what you expected to see. It's getting better, and and as ecommerce becomes more prevalent within the country and more people, start buying things online then that auth rate is gonna go up, but you know it might take a few more years before before the country gets there. Online merchants can can protect themselves by, looking at what options are there in the market. Just like any other country, you know, there's there's alternative payment methods. If you know that you're going into a market where the auth rate is gonna be low to start with and that you're and that it's a high risk market, then why not offer alternative payment methods that minimize that risk, you know.
Pablo Torres:A payment method that it's super easy, to understand is OXXO, You know? OXOs are kind of like your corner store. They they are everywhere. There's one maybe every 2 blocks or something like that. And what you do is you you print the voucher like a a bar code that you get when you check out with OXXO and then you go and pay with cash.
Pablo Torres:So there's no risk of, you know, somebody, using a credit card on your website and even a stolen credit card, and even if they're using a stolen credit card, it's gonna be at the location. You're not gonna be dealing with that, you're gonna get the cash from OXXO. That's it. And so that that protects your account, that protects your reputation, that protects you from, you know, dealing with with that kind of risk. There's something that I've been, seeing a lot with with Mexico lately.
Pablo Torres:It's kind of funny because if I didn't speak the language, then then it would be, I would look at the data, like, the information that they're using at the time of checkout, and and I wouldn't make anything of it. But knowing the language, kinda gives me a little bit of that in when I'm looking at transactions and, you know, just knowing a little bit of of of the history and like the the TV shows or whatever. You you start realizing that a lot of the the names that they're using are names from characters, from movies, or from cartoons, or from, you know, or they're using, nicknames that are very common in in, the country. Things that you know if you saw John Smith for example, if you were in in in the US and you would kind of think about it twice, it's kind of the equivalent of that. You know, if you're going into into a market like that and and kind of having that in or that little edge, I guess, if if you wanna call it that, it definitely gives you an advantage.
Pablo Torres:It it's it's scary, you know, go going into these markets, it it can be so scary, especially when you're when you have such a saturated market, everyone is coming up with new products, new ways of selling, new payment methods, and it's you know while it's it can be hard and challenging to to stay on top of all of these trends, Latin America is is also somewhere that shouldn't be approached with fear. You know in the end in the end of it all, it's an opportunity. It's it's you know, soon gonna be like a, I don't know how many 1,000,000,000,000 of dollars market. And so when you go in with fear and you start rejecting transactions and you start, you know, canceling orders because you're afraid of losing money, I'd say that's that's the wrong approach. I think what you should do is you should surround yourself with the people that have the experience, that have the knowledge, and and go in confident that you're gonna make money.
Pablo Torres:Going in feeling empowered is is better than going in with, you know, kinda like your defense up.
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