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AI to prevent consumer frauds in e-commerce space

Swathi Moorthy New Delhi | Updated on August 22, 2018

As the number of e-commerce customers is rising, so are the instances of consumer frauds, causing huge loss to online retailers. But, the founders of Gurugram-based start-up ThirdWatch Data Pvt Ltd say their fraud analytics product is bringing down frauds by 30-40 per cent since its launch in December 2017.

In recent times, arrests have been made in Hyderabad and Rajasthan for defrauding Flipkart of products worth a few lakhs. Amazon India too has faced consumer frauds.

Fraudulent deals

Shashank Agarwal, Co-founder, ThirdWatch, said customer frauds can happen at two levels — return to origin (RTO) and abuse of promo codes. In the latter case, a consumer creates multiple user IDs to apply the code for ordering. In the case of RTO, customers abuse the refund policy. Most e-commerce players offer 30-day return and refund policy, where a consumer can get the refund within a few days.

For instance, a customer can order an original polo shirt worth a few thousands and return a fake one. Companies’ quality check takes 30 days, before which refunds are made to customer. In addition to this, pranksters place orders with cash-on-delivery option with fake addresses. All these cases result in huge losses for e-commerce companies. Agarwal explained that each order has a direct cost of ₹200 for courier. In addition, the company has to bear the transit cost, inventory and logistics, which comes to additional ₹200 per order. If one order costs company ₹400, considering that the recall rate is close to 30 per cent for a bigger e-commerce company that delivers at least one lakh orders a month, the cost is huge.

That is where ThirdWatch AI comes in. E-commerce sites just have to integrate this service into their system. The software collects data such as computer configuration, time zone, browser plug-ins and IP address of consumers. It then uses Artificial Intelligence to profile the consumer to identify unique user and fraudster.

The data collected is encrypted and stored in data servers in India. Also personal data of the user is not collected, ensuring privacy, Agarwal said.

Since its implementation, the company has seen 5 per cent increase in successful deliveries and in some cases 80 per cent reduction in RTOs, Agarwal said.

Expansion plans

The company currently works with 30 e-commerce companies, including food delivery platforms, in India and is doing Proof of Concept (PoC) with two major players in the country. Agarwal said the company is also exploring FinTech.

“We are doing PoC with a payment gateway in Turkey and are in talks with two fashion e-commerce players in Dubai,” Agarwal said. The company is also looking for opportunities to expand in South East Asian countries, where online retailers face similar problems.

The company is also working on an application that will customise the payment option for e-commerce users. For instance, genuine customers might be shown both cash on delivery and online payment, whereas fraudsters will be shown only online payment.

For its expansion and product development, the company is looking to rise Series A funding. The company has invested ₹1.65 crore so far.

Published on August 22, 2018

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