The number of credit cards in Singapore has reached 9,216,705 cards, a figure that includes main and supplementary cards, according to the Monetary Authority of Singapore (MAS). That means that each resident in Singapore who complies with the eligibility criteria1 holds an average of 2.2 credit cards, one of the region’s highest.

The wide availability of eNETS, an online payment system linked to Singapore’s preferred wallet card, has not slowed down the use of credit cards and card-associated gateways as online payment methods. In fact, Visa Singapore2 experienced an increase of 23% in the online purchases made on Singaporean Visa cards in 2012. The growing appetite of Singaporean consumers for online shopping coupled with the country’s world-class internet infrastructure and access -75% of its inhabitants are daily internet users- are fueling a blooming e-commerce sector, where sales registered US$7 million3 in 2013.

What about Online Fraud?
Needless to say, increasing online sales unavoidably entail a growing number of fraud cases, especially those cases involving card-not-present (CNP) transactions. It all begins with fraud attacks, aimed at stealing credit and personal data. These data is then sold to fraudsters that use it to persistently hit on online businesses in order to acquire goods that can be sold instantly at the same price, thus leaving very little trace of their crime and monetizing the resources that fraudsters invested in acquiring the stolen data. Sadly, recent cases show us that any country is vulnerable to these attacks.

When hit with an increasing number of fraudulent orders and in an attempt to reduce fraud, these are merchants’ most common reactions:

1. Restrict the number of orders/the amount that customers can make per week/month
2. Set up extra verification tests, such as requiring customers to send a copy of their passport/credit cards
3. Ultimately, close down or stop offering certain payment methods that are perceived as risky, such as credit cards

Few online merchants realize that limiting the amount of orders, setting up extra verification tests or failing to offer popular payment methods also affect genuine clients that need to submit documents, are unable to use their preferred payment methods or cannot buy as much as or as frequently as they want. As a result, genuine buyers’ purchases decrease, meaning that these reactions reduce fraud at the expense of sales growth.

How can Merchants Choose an Efficient Fraud Protection Solution?
As CNP transactions grow, so does the number of solutions available in Singapore. Unfortunately for online merchants, the restrictive approach described above is also common amongst main fraud protection providers that rely on these measures as a way of reducing fraud, without realizing that a high rejection rate (orders from both fraudsters and genuine buyers that were rejected on the suspicion of fraud) is as detrimental to an online business as having a high chargeback rate (orders that were fraudulent). In order to ensure that their fraud protection does not block their ability to grow, it is essential for online merchants to clarify the following aspects when assessing different providers:

Which verification tools do providers use?
Fraudsters’ attacks are growing in numbers and sophistication. No verification tool, when used alone, can protect your online business 100% from attacks. As a result, the more tools a provider uses, the better protected is your business. Solutions that center only in one verification tool do not cover areas that can be easily exploited by savvy fraudsters. This aspect is especially important for those online merchants who want or need to expand their businesses overseas, since verification tests performed by third-parties which are standard practice in merchants’ home countries might not be required overseas to complete purchases. An example of such tests would be the OTP or One Time Password sent via SMS to the card holder’s hand phone by Singaporean banks.

What’s the provider’s approach to online fraud?
Some providers tend to focus on detecting threats and blocking any order that might seem suspicious, without performing further analysis before producing the risk decision. What makes matters worse is that these providers tend to repeat the same threat-detecting template in every merchant, overlooking each merchant’s specific needs. This approach restricts growth in the long term, and it’s not sustainable for your online business. It is advised to look for solutions that are able to customize as many fraud detection parameters as possible to your business needs, and that try to minimize the customer insult factor (caused by the rejection of a genuine order). This is particularly important in a market like Singapore, where social media savvy consumers can easily share their pleasant/non-pleasant customer experience at your website.

What’s the Real Cost of Fraud Protection?
Providers tend to charge a fee either per transaction or as a percentage based on merchant’s transaction volume, which is usually tiered. The key for merchants is to find out whether the solution they choose entails fees such as set up, maintenance, upgrade, early termination fees, which are usually hidden and add to the total cost of merchant’s fraud protection policy. The fees charged are also important because they determine your per-transaction cost: no merchant wants to be locked up in a costly, ineffective solution that significantly raises the per-transaction costs and makes merchant lose ground against competitors.

Does the Provider Share your Corporate Objectives?
Fraud protection is about protecting merchants against unauthorized chargeback risk, but it should also be about ensuring merchants’ revenue growth. Translated into fraud management practice, this means that a solution needs to find aspects to accept, rather than to reject a transaction, in order for businesses to increase sales and revenue growth. Merchants are therefore advised to share their growth objectives with their providers, so they can work together to attain them.

Sources
1. Foreign residents in Singapore are requested to prove a minimum monthly income of S$ 4,500 in order to be able to hold a credit card. Therefore, the number of residents used for this estimation excludes foreigners’ holders of a Work Permit (WP).
Monetary Authority of Singapore:
https://secure.mas.gov.sg/msb-xml/Report.aspx?tableSetID=I&tableID=I.17
Singapore Statistics:
http://www.singstat.gov.sg/statistics/browse_by_theme/population.html
http://www.singstat.gov.sg/publications/publications_and_papers/population_and_population_structure/population2013.pdf
Ministry of Manpower:
http://www.mom.gov.sg/statistics-publications/others/statistics/Pages/ForeignWorkforceNumbers.aspx
2. Press release “Visa My Finds launches on 30 May 2013”, Singapore May 29 2013, Visa Singapore
Visa Singapore:
http://www.visa.com.sg/aboutvisa/mediacenter/NR_SGP_290513.html
3Press release “CNA: E-commerce firms thriving in Singapore”, February 2013, Singapore Ministry of Foreign Affairs
http://www.mfa.gov.sg/content/mfa/media_centre/singapore_headlines/2013/201302/news_20130206.html

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