Mexican consumers on hook for fraud losses looking to switch

Mexico’s consumers are being hit by payment fraud losses, but they are prepared to do something about it. In particular it seems that online purchases are a big target for fraudsters as the country’s e-commerce market booms.

Fraud rises

In its latest country report on Mexico, The Paypers notes that consumers are exposed to fraud and are looking to their providers to tackle the problem. It cites research by Aite that shows nearly half of all Mexican consumers have been victims of fraud in the past five years.

“Fraud prevention is considered a key issue by Mexican consumers who will increasingly look for sophisticated protection for their online purchases,” the authors write.

They also cite a report from the Mexico Daily News showing that banks had experienced approximately 2.9 million cases of suspected fraud involving MXN 7.3 billion, which is about $US 480 million. This amounted to a three per cent increase from the year, with credit cards accounting for nearly half of the losses.

And in terms of the bank-consumer relationship, customers are personally on the hook for over a third of the losses. “Of the MXN 5.16 billion losses on credit and debit cards, cardholders had to absorb a loss of MXN 2 billion. In recent years, debit card losses have grown faster primarily due to the growth in such payments as debit cards become a substitute for cash,” says the report.

Action demanded

It seems that with these losses being felt directly in their pockets, Mexican consumers are already switching banks in the hope of better security.

Research conducted on behalf of the NCR payments team in 2013 showed that, at that time, one in four (28 per cent) Mexicans with an account believe bank security systems for online transactions are “insufficient and should be strengthened”.

When asked about what is most likely to switch banks, the same study found 17 per cent of respondents in Mexico said fraud was their number one concern – either because their provider wasn’t doing enough or because they thought a competitor offered better protection.

More than four in five (84 per cent) of the consumers in this survey also said they would like the ability to set restrictions on how their card could be used. Mexican consumers have a proactive attitude and this should be welcomed. However, the banks need to make sure they are responding in kind.

Tailored solutions

All these concerns about payment security and fraud underline the importance of prevention. But The Paypers report also rightly mentions that solutions need to be tailored and intelligent.

For example, robust, real-time fraud prevention solutions are needed to defend against fraudsters purchasing airline or bus tickets just shortly before travel. In consumer electronics, fraud strategies need to be tailored to “accommodate high risk products with low margins”.

Finally we also need fraud prevention analytics coupled with robust strategies and rules “specifically tailored to the mobile channel, taking account of the authentication and verification challenges this channel brings”.

Active fraud prevention techniques like these will help stem losses. As the statistics suggest, Mexico’s consumers are crying out for their banks to do more.

Written by Dena Hamilton

Dena Hamilton

Dena is NCR's Director of Enterprise Fraud & Security Software Solutions. She specializes in fraud, risk, compliance and security, with over 35 years of experience in the financial services space. Her focus is the development and deployment of enterprise financial crime solutions optimized in prevention, detection and back office efficiency.

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