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Online fraud & country reputation

Posted by Michael Bloch in ecommerce (Sunday June 4, 2006 )

A recent CNN story about a Russian site that allows users to download albums for less than $1, which is *supposedly* legal under Russian law (which I doubt), brought a few points to mind about the serious reputation issues that some some countries still have in the online world.

Parts of Eastern Europe, Asia, the Middle and Far East are still a huge red flag to ecommerce merchants – many of us don’t wish to provide goods and services to people/businesses from certain countries because of rampant fraud originating from those regions.

Sure, there’s been improvements in some affected countries in recent years, but the incidence of fraud, per capita, is still far greater than the levels of “safer” countries such as the USA, UK, Australia and Canada.

Merchants are getting better at identifying and catching these transactions before they go through, but the work we put into screening just leaves a very bitter taste in our mouths and makes us instantly suspicious of transactions from certain regions.

For example, if someone posts up a classified ad in my forums and it mentions Nigeria, or the source IP is Nigeria, I still just hit the delete button – no further investigation. The same goes for purchases originating from this country.

I have nothing against Nigerians at all, it’s not a racism issue, but when fraud levels *still* run close to 100% in some sectors I watch, then it’s really not worth the risk or the effort in chasing these transactions up. I know many other merchants who feel the same.

This unfortunate attitude really does put the legitimate merchants and users from these countries way behind the 8-ball in establishing themselves online and will continue to do so long after their governments finally get somewhat of a handle on the problem. The damage has been done and it’s been occurring for way too long.

Given that the governments of these various countries appears to be so blase and/or incompetent in controlling fraud, the responsibility really falls those who want to make it in an online world to help improve their country’s image.

As a merchant and service provider, What I’d like to see honest merchants in countries affected by such a reputation do is to band together to form associations, somewhat like the Better Business Bureau. Maybe these organizations exist, if they do, then they need to look at promoting themselves better.

After setting up some quite stringent criteria for membership and *acting* on any member business that goes rabid; an association of this type could go a long way to reducing fear among their Western counterparts; greatly improving business to business partnerships and general ecommerce flow in these countries. The associations could list member businesses and have some sort of id verification process implemented that members could use when establishing initial communications with potential partners and providers. Especially beneficial would be a list of Western companies that endorse the association.

Systems could also be set in place so that ordinary consumers of these countries could join; decreasing the issues they face in making purchases in an online environment.

Until such associations are formed and recognized, another strategy that merchants from these countries can consider are third party security verification seals for their sites. These seals not only indicate that the site is secure, but the business is who they say they are. Third party verification seals are also very useful on any ecommerce site for providing assurance to potential customers and therefore helping improve sales conversions.

It’s a sad online world we live in where even in 2006, we continually find a need to judge a person’s character and trustworthiness based on their country; but none of us involved in online business can ignore the problem and hope that honesty will prevail of its own accord. It simply won’t happen.


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