Global Electronic Card Firms Shun Kenya Over Fraud

International electronic transaction facilitators are avoiding the Kenyan market as losses mount from card fraud.

Borderlinx, an American company which deals in cross-border electronic commerce, has suspended its services in the local market in a move that will hurt international buyers. The fresh turn of events is also expected to retard development of e-commerce.

The company which connects consumers in more than 55 countries enables customers to buy products from US and UK websites and have them delivered – with all shipping costs, customs duties and taxes calculated and prepaid.

“We were forced to stop providing service to Kenya last December.  Regrettably, in view of the serious fraud problems with certain Kenya transactions, we simply could not afford the high level of scrutiny which was required to continue offering our service to Kenya customers – and putting our online merchants at risk,” said John Bich the company’s chief financial officer.

The company stated that in the fourth quarter of last year there was high incidence of fraud, which involved use of stolen credit cards in the purchase of items from online merchants, which were destined for Kenyan delivery addresses.

“We uncovered a number of fraudulent transactions in co-operation with the online merchants from whom the products had been obtained, and we returned the products to the merchants – at our cost, which was considerable,” said Mr Bich.

Online transactions have been rising in the Kenyan market with most users buying computer software, electronics, cosmetics, clothes and books. Credit card usage has also been on the rise with value of transactions conducted through the channel rising by 8.4 per cent last year to Sh4 billion.

However, the rise has been accompanied by increase in fraud incidents which players are urging the government to put in place mechanisms to address.

“The concerns from local and international players are real and founded. Kenya may be turning out to be a safe haven for card fraudsters due to weak laws on cyber fraud,” said Danson Muchemi, business development director at JamboPay.

Card users have also been asked to be more cautious with their cards especially in supermarkets where their cards are usually taken to back offices following failed attempts to pass transactions at the till, opening room for card skimming.

There are fears among users that the move by Borderlinx may make other international online payment providers and e-commerce facilitators review their participation in the Kenyan market.

Paypal has already been noted for having pulled the plug on some of its users in Kenya but it clarified that the issue was user specific.

“There might be an issue with the client’s PayPal account that is why they are not able to transact with them,” said the company in an e-mail response to the Business Daily’s queries holding that it was still in the market.

However, the Kenyan Paypal account cannot withdraw funds in a local bank but through a US bank. The company cites difference in laws and financial regulations of each country in the arrangement. The regulation has, however, been attributed to fears of fraud, which leaves Kenya’s online sellers in a dilemma on how to get cash for goods that they sell online through the platform.

Source: Business Daily Africa