Se­cur­ing China's e-com­merce growth

The Pak Banker - - Front Page - Jeff Liao

BE­TWEEN June 2011 and 2012, China's In­ter­net pop­u­la­tion reached 538 mil­lion, of which some 194 mil­lion had shopped on­line. On­line re­tail sales in China have soared in re­cent years and are expected to hit $360 bil­lion by 2015 - up from about $121 bil­lion in 2011 - ac­cord­ing to The Bos­ton Con­sult­ing Group.

Im­pres­sive as the num­bers are, there's an­other set of sta­tis­tics that's even more strik­ing: Nearly onethird of the on­line shop­pers in China fell prey to fraud­u­lent web­sites dur­ing that pe­riod, cost­ing them $4.7 bil­lion, ac­cord­ing to the China Elec­tronic As­so­ci­a­tion.

The tricks de­cep­tive on­line sell­ers use to swin­dle un­sus­pect­ing cus­tomers are many. But cy­ber-crime spans many more fraud­u­lent ac­tiv­i­ties than just de­cep­tive sell­ers. With­out safe­guards against the ped­dling of coun­ter­feit goods, bo­gus web­sites, stolen pay­ment card data and other tricks of the trade, cy­ber­crime can erode con­sumer con­fi­dence and sti­fle le­git­i­mate on­line busi­ness. The good news is that both the will and the means to deal with the prob­lem ex­ist.

The Min­istry of Com­merce re­cently an­nounced it would in­tro­duce more spec­i­fi­ca­tions to bet­ter guide the de­vel­op­ment of e-com­merce in the coun­try. And the pub-

Com­merce lic and pri­vate sec­tors are ex­plor­ing ways to fur­ther build trust, in­tegrity and se­cu­rity in the bur­geon­ing in­dus­try.

At the World Eco­nomic Forum in Tian­jin, a multi-stake­holder group called Part­ner­ship for Cy­ber Re­silience Ini­tia­tive shared its best prac­tices on cy­ber risk and se­cu­rity with mem­bers of the gov­ern­ment and busi­ness. In July, the Pay­ment and Clear­ing As­so­ci­a­tion of China hosted a sym­po­sium that was sup­ported by the Peo­ple's Bank of China and co-spon­sored by Visa and China Union Pay on how to se­cure pay­ment sys­tems, with ecom­merce fea­tur­ing promi­nently.

An­other ini­tia­tive, the China eCom­merce Pro­tec­tion Task Force, is tak­ing shape. In­dus­try stake­hold- ers, in­clud­ing banks, pay­ment ser­vice providers, pay­ment sys­tems and brand own­ers will share in­for­ma­tion on emerg­ing threats in in­tel­lec­tual prop­erty in­fringe­ments and pay­ment fraud. They will co­or­di­nate ef­forts be­tween the own­ers of brands, whose prod­ucts are be­ing coun­ter­feited, and the pay­ments in­dus­try to mit­i­gate il­le­gal ac­tiv­i­ties.

As tech­nol­ogy and the In­ter­net broaden our reach into other mar­kets and seg­ments of so­ci­ety, they also broaden the op­por­tu­nity for crim­i­nals to act. Cy­ber-crim­i­nals are be­com­ing in­creas­ingly so­phis­ti­cated and can launch an at­tack from any­where. Ac­cord­ing to se­cu­rity firm Sy­man­tec, 90 per­cent of on­line breaches in­volve or­ga­nized crime tar­get­ing cor­po­rate in­for­ma­tion.

What's most wor­ry­ing about on­line fraud is that it is be­com­ing harder for mer­chants to de­tect, ac­cord­ing to my col­league, Michael Bradley, who is the Asia-Pa­cific manag­ing di­rec­tor of Cy­berSource. A Visa com­pany, Cy­berSource is one of the world's largest providers of e-com­merce pay­ment man­age­ment so­lu­tions with some of the best-in-class fraud man­age­ment ser­vices for mer­chants. The Cy­berSource 2012 On­line Fraud Re­port in­di­cates that about 50 per­cent of on­line mer­chants say that fraud to­day is "cleaner", mean­ing that fraud­u­lent or­ders look like valid or­ders.

The con­se­quences of cy­ber­crime can be es­pe­cially dam­ag­ing for emerg­ing e-com­merce mar­kets, where main­tain­ing trust in the sys­tem is needed to un­der­pin the growth of the in­dus­try. That's why an in­creas­ing num­ber of banks, mer­chants, and pay­ment ser­vice providers in China are in­vest­ing in se­cu­rity and fraud man­age­ment sys­tems. Ac­cord­ing to Bar­clays Cap­i­tal, e-com­merce in China grew by 66 per­cent from 2010 to 2011, and the growth will continue. But a grow­ing e-com­merce mar­ket also causes a sharp in­crease in cy­ber-crime. China will have to co­op­er­ate on a global level to tackle is­sues spe­cific to its mar­ket that have global ram­i­fi­ca­tions and global threats that have lo­cal im­pli­ca­tions.

Pro­tec­tion needs to be in place for ev­ery­one, start­ing with con- sumers, if China's e-com­merce in­dus­try is to grow as it can and should. Part­ner­ships such as the China eCom­merce Task Force will be in­stru­men­tal, as will be the in­di­vid­ual so­lu­tions of each con­stituent. Pay­ment ser­vice providers in­ter­ested in join­ing the group should contact Visa. The data flow­ing through mer­chants should be pro­tected so that, if it is com­pro­mised it can­not be reused to com­mit fraud. "To­k­eniza­tion" and hosted pay­ment ac­cep­tance ser­vices are two ex­cel­lent ways to limit the data at risk and re­move both mer­chants and con­sumers out of harm's way.

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