Credit Card Fraud in Brazil

Online payments in Brazil have been subject to an increasing amount of fraud. In this article we will look at the statistics for credit card fraud in Brazil and what companies are doing to prevent it.

Credit Card Fraud with Brazilian Online Payments

Credit card fraud has become increasingly common in Brazil, mostly due to the lack of security measures clients apply to their personal data. Brazilians are notorious for using unprotected wi-fi networks and entering personal information on computers from public spaces like cyber cafes.

The country’s rates of credit card fraud are some of the highest in the world. According to recent reports, over 33% of Brazilian credit card users claimed to be a victim of some sort of fraud in the year of 2013 and that losses from the same period caused by these frauds amounted to BRL 1,5 billion.

Recently, e-commerce in Brazil has experienced an increase in credit card fraud, partially due to the country’s public aversion to additional layers of security with online payments. The country’s regulations and credit policies are also tilted towards the consumer side, which allows for some types of abusive behaviour towards online stores.

Types of Frauds and Chargebacks

Any e-commerce shop without a payment intermediary or additional security measures like 3D Secure are susceptible to fraud and chargebacks, which is the case for most e-commerce companies in Brazil. Online stores classify types of the most common credit card fraud in the following categories:

• Identity Theft: Known as Fraude Efetiva in Portuguese, this is the most common type of credit card fraud, in which a client’s personal information is stolen and used by a malicious third party to make purchases

• Chargeback Fraud: Known as Fraude Amiga in Portuguese is very common in Brazil, in which a person very close to the customer and with access to their personal information makes purchases without their consent. There is also the case in which customers receive products but require the credit card payment back based on false claims

Both these types of fraud lead to chargebacks or the request by the client for the credit card payment to be returned, a dreaded situation for e-commerce owners who end up without the merchandise and the payment itself. Brazilian consumer defense institutions like Procom require any credit card charges contested by customers to have the payment interrupted and returned immediately, which makes stores more vulnerable to these types of scheme.

Measures to prevent loss by Fraud

Brazilian e-commerces apply a variety of actions to prevent loss by fraud.

Anti-Fraud Systems

One very common solution is proprietary and third-party anti-fraud systems which analyze customers data before giving clearance for purchases. The number of parameters these systems cross can be upwards of 200 and are mostly related to consumer behavior. Some of these parameters are:

• Credit card security code
• Client’s geographical location
• Time spent and pages viewed during the last page visits
• Checking CPF registry from Receita Federal
• Crossing CEP data with the Correios database
• Client data in the country’s credit evaluation services
• IP address, operating system and browser used

The cost of these systems can vary depending on what parameters are used and the capacity for simultaneous analysis. The speed in which the data is checked is also an important factor considering quick checkouts usually generate more conversions.

Bank Security Measures

There are a number of security measures applied by banks which can reduce the risk of chargeback for e-commerce companies. For example, payments can be handled by the Online Banking environments where data security is more rigid.

There are also security features implemented to credit cards by card networks, which is the case for 3D Secure, a system that assists in the identification of customers and places the risk of chargebacks for the banks instead of the stores.