Fraud Risk for PSP in LATAM

The payment services sector in Latin America grows every year by a big margin. In 2019 the payment volume amounted to 80 billion dollars whereas in 2016 the market had a total size of 50 billion. On the one hand this enormous growth shows the big opportunities that payment services providers have but on the other hand the attractiveness for fraudulent activities rises as well. If you are a company that wants to start out in LATAM you face a set of challenges regarding fraud, and it is important to know how to mitigate them.

Having many systems means having many attack possibilities

Most Latin American countries have their own systems for their own currencies. Only a third of the consumers possess a credit card that can process foreign currencies. It is important for a PSP to offer services in local currency. Due to this very granular market coverage there are more ways of conducting fraud than in a more homogenous one.

In comparison to other parts of the world, in LATAM new account fraud is a major problem About every fourth registration has been deemed fraudulent Strongly linked with this phenomenon is the identity fraud which is being used to gain access to services with stolen or fake identities.

LATAM faces nearly double the amount of chargebacks compared to other regions in the world, with about 1.5% vs. 0.8% in the US. Even more concerning is the percentage of rejected orders due to fraud suspicion – 7% in LATAM compared to 2.5% in the US.

The Capacity to Combat Corruption by the Americas Society, Council of the Americas, and Control Risks, is a way of describing a countries’ ability to cope with fraudulent activities. For 2019 the overall LATAM score is lower than compared to 2018. Especially Brazil, Mexico and Chile suffered from a downgrade, although being the most important countries when it comes to payment service volumes.

How merchants can secure their businesses

An approach with only a subset of actions doesn’t help since fraudsters switch between attack methods. Security is a 24/7 job and can’t be tackled with traditional rule sets and matching lists for names or IPs rather than an elaborated software with multiple modules and sophisticated fraud detection algorithms.

Following measures, among others, are usually combined to achieve better security: Checking the IP address, IP geolocation and device IDs. Furthermore,  real time transaction tracking, maintaining customer profile databases, posing security questions for transactions, biometric identification and one time passwords.

The rising help of Artificial Intelligence is already helping companies. All big credit card providers offer such systems, and they could already prevent billions of USD of fraudulent activity in LATAM. Another advantage of these systems is the reduction of false positives which usually lead to costly manual interventions.

PayRetailers is one of the fastest growing PSPs in Latin America, partly due to the fact that it has introduced a strong solution to combat payment service fraud and maintains a strong network of security partners.