Fraud, ThreatMetrix and China Payments 2010
China’s economic juggernaut is unstoppable. With a middle class now exceeding 60 million people, the contrasts of wealth are extremely stark. In Beijing’s Chaoyang (朝阳区) district you can step out of a glamorous shopping mall with Gucci and Chanel while in a backstreet someone is cooking noodles over a naked flame.
Internet e-commerce magnifies these contrasts: credit card adoption (over 25% year-on-year growth) and e-wallets like Tenpay’s “QQ Coin” and Alipay.com are booming alternative payments solutions – years ahead of U.S.-based solutions. In fact, today PayPal ranks a distant third. (Tenpay is the exclusive online payments provider of Tencent, one of the largest and most powerful Internet companies in China today. Tencent’s service reach includes instant messaging, gaming, blogs, and various wireless value-added services branded under the “QQ” name; also included in the group’s umbrella of companies is an eBay-like online marketplace called Paipai. Tenpay provides an online payment platform for all of these services. With over 26 million users, Tenpay easily ranks among the leading third-party payment companies in China. As part of the Alibaba Group, Alipay.com is China’s leading independent third-party online payment platform.)
A small part of Alibaba's stunning campus in beautiful Hangzhou
Maturing international settlement means that e-tailers are fulfilling orders domestic and abroad. International sales to Chinese nationals living abroad and westerners seeking inexpensive or quality China manufactured goods are growing rapidly. But guess what? This huge booming Internet marketplace is the new playground for e-commerce fraudsters to make money.
In the past, government enforced limits on daily money transfers and a cultural predisposition for debit cards with small balances meant that fraud, while common, was of a small monetary value. Today, however, China’s population is shifting from “saving” to “spending.” Larger sums of money are flowing.
A fraudster from a less wealthy province like Ānhuī (安徽省) can feed their family for a week from a single fraudulent act. But fraudsters rarely stop at one act. Also, international fraudsters who have seen western e-tailers adopt solutions and skills to combat fraud, see the new China-based e-tailers as “easy-pickings.”
These China-based e-tailers find challenges of fraud a major impact to their businesses and often don’t have the same tools for address verification or transaction validation that western merchants have access to. So, a real-time Fraud Detection system powered by device intelligence is essential to understand which customers are “good guys” and which are “fraudsters” (诈骗犯 – zhàpiànfàn). By understanding more about where the customer is coming from, the session behavior, and if they are using proxies or botnet hosts, they have extra confidence in fulfilling orders thus increasing revenues from domestic and global customers.
Please drop by and visit ThreatMetrix and say hi or “Nǐ hǎo” if you are coming to Payment China 2010, May 10 – 11 in Beijing.
- David
David Jones, chief technology officer, vice president of engineering and co-founder, ThreatMetrix
