Fraud fears unnecessary limit cross‑border e-commerce

Demand from online shoppers globally to purchase from US retailers is high. However, a lot of retailers reject foreign e-commerce orders automatically. By carefully planning and choosing familiar markets, retailers from the US can increase their international sales without experiencing large fraud losses.

There was a slight dip in the growth of US e-commerce retail in 2018. Of the domestic online retail sales in 2018 (517 billion dollars), 40% went to Amazon. Competing and growing business is therefore hard for smaller US e-commerce retailers. Selling products on Amazon and other marketplaces in addition to selling in their online shop is one option. Another option, which is being ignored by many retailers, is cross-border e-commerce.

Only 36% of the e-commerce merchants in the US currently sell abroad, even though cross-border sales are an opportunity to grow. Even though the rates of cross-border sales are low, the US is the second largest destination for international online shoppers. According to PaymentsSource, growth rates for cross-border sales vary from 10% in the US to 30% in Europe over the upcoming years. The global B2C cross border e-commerce market is expected to be valued at 1 trillion dollars next year.

Fraud holds sellers back

Concerns about fraud are holding e-commerce sellers back. Understanding the risks and potential rewards is the key to confidently selling into other markets.

Being worried about fraud is a valid reason for e-commerce merchants. The ‘card-not-present’ fraud is growing very fast right now. The expected cost for the global e-commerce industry is 130 billion dollars up to 2023. However, blocking or rejecting most international orders is costing the retailers good orders.

A study shows that identity spoofing and device spoofing fraud among cross-border orders were 15-22% more likely than among domestic orders. However, retailers have rejected 69% more cross border orders due to fraud concerns. Some merchants automatically reject orders from specific high-risk countries.

According to the US Payments Forum, the CNP fraud rate is above the global average. It is unlikely that US retailers will stop their domestic sales as they feel more comfortable managing those risks. Retailers can plan their e-commerce expansion carefully, e.g. by detailed planning of their payment methods, fraud prevention practices, and customer outreach for order validation. This can increase sales while diminishing the risks of cross border selling.