How this Tokyo-based startup is protecting e-Commerce merchants against fraudulent orders
e-Commerce is one sector that has been on a growth spurt for decades; even a global health pandemic that brought economic slowdown and recession in many parts of the world had positive impacts on the online retail industry.
With people isolated at home and movement restrictions in place, online shopping was among the few avenues left for matters of both necessity and entertainment. The entire region saw unprecedented growth in online retail. The truth is, pandemic or no pandemic, the ease of being able to shop and sell online any time anywhere is something that we all love in the digital age. With more and more consumers shopping online, e-Commerce is expected to be on this growth trajectory in the coming years too.
However, while online merchants are mostly enjoying this boom and attaining unicorn and decacorn statuses within years of launch, they are also faced with certain challenges. One of the biggest hurdles that businesses in the e-Commerce sector in the APAC region face are fraudulent transactions and chargebacks. Only in a month’s time, between June and August 2019, an average of $160,000 in successful monthly fraudulent transactions was recorded by retail, e-commerce, and financial service businesses in APAC, according to the 2019 LexisNexis® Risk Solutions True Cost of Fraud APAC study.
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Fraudulent transactions can happen either in the case of a friendly fraud where a person is deliberately looking to get away with cyber theft, or when a person mistakenly sees a forgotten charge. These are just two examples of why a customer might call their credit card company to dispute the charges. The other type of more common eCommerce fraud comes from bad-actors who are trying to use bought or stolen information from something like the dark web and use the information of unsuspecting consumers and making fraudulent purchases with the information.
Established in January 2017, Lizuna, a Tokyo-based startup is helping SMEs fight back against fraudulent purchases and chargebacks.
Utilising big data, analytics, and machine learning for fraud detection and prevention
Lizuna CEO and founder Jason Sio started dabbling into startups way back in 2014 after he moved back to Japan from the US. He soon realised the challenge of fraudulent purchases faced by e-Commerce retailers and observed that the existing solutions were either too expensive or inaccurate and that there weren’t any customisable options in the market to fit different business needs. With a small yet strong team of 2 industry experts, Jason started the company with a vision to build a real-time adaptive system to stop and prevent online fraud.
Lizuna’s key offering is their flagship software solution Beacon, launched within a year of the company’s establishment. Before launching the software to the public, Lizuna conducted private testing of the software for almost two years through several partnerships with high-volume merchants that have a high risk of fraud activities and was successful in greatly reducing fraudulent transactions and chargebacks. The Beacon system utilises and combines big data, analytics, and machine learning for fraud detection and helps prevent such transactions. Following a two-step verification process, the software first enables a passive verification of the transaction leveraging big data. Thereafter, an active verification is prompted via direct messaging. Beacon allows merchants to automate and keep track of customers’ verification status easily and flags high-risk orders to quickly detect fraudulent behaviours.
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Beacon not only keeps track of order history for every customer but also has a visualisation feature that allows merchants to measure and track the velocity of unusual activities. Beacon is currently available to the public for Shopify merchants since April 2018 and Lizuna is actively looking at onboarding more e-Commerce partners.
Lizuna’s Beacon has managed to reduce the rate of un-detect fraud to just 0.3% in a period of less than 6 months for Shopify merchants and helped with an overall 70% or more reduction in fraud based on an average 1% fraud rate.
Looking at onboarding more merchants in Japan and Southeast Asia
This year, as more companies in Japan and across the region embrace digitalisation and stride towards e-Commerce, Lizuna hopes to expand and help more merchants with fraud prevention. Since the pandemic, more and more businesses are exploring online retail not only in Japan but across the region. According to a report by Research and Market, Japan’s e-Commerce Market is expected to reach USD 325.9 billion by the end of the year 2026. The Google Temasek report found that online shopping in Southeast Asia is set to hit $172 billion by 2025 versus a previous $153 billion estimate.
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Currently, Lizuna is the only localized fraud solution platform available on the Japanese Shopify platform and available globally. In a post-pandemic world, for a resilient and robust business model, companies cannot afford to lose revenue in fraud. This is where Lizuna’s Beacon can help them protect their business from fraudulent orders and fake transactions. Merchants can either directly integrate Beacon into their systems or they can feature Lizuna’s Beacon system in their app store.
e-Commerce players in Japan and Southeast Asia looking to protect themselves against fraudulent transactions and chargebacks can contact Lizuna here. Learn more about them here: https://e27.co/startups/lizuna/
This article is produced by the e27 team, sponsored by JETRO
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