Battle of the North Americas: Who Has More Fraud?
Canadians are often perceived as more polite, and Americans as more animated, or extroverted. But when it comes to online shopping, there are more noticeable differences.
July is a big month in North America. Canadians usher in the month with Canada Day festivities, and as their celebrations settle down, Americans light up the barbecues and start celebrating the 4th of July. For many of us, telling Canadians and Americans apart is no easy task (unless they happen to utter a keyword like “about”).
Canadians are often perceived as more polite, and Americans as more animated, or extroverted. But when it comes to online shopping, there are more noticeable differences. To honor these two great nations on their holidays, Riskified provides insights into some lesser known differences between the US and Canada.
Who Stole My Hockey Stick?
Riskified processes millions of orders, allowing us to discern nuances in American and Canadian shopping behaviors. Our data shows that Canadian consumers spend more. On average, shopping carts in orders placed with Canadian cards & a Canadian billing address are worth 15% more than the shopping carts of their neighbors to the south.
Despite spending more per order, Canadian domestic online orders are slightly safer that US domestic orders:
While Canadian orders are safer overall, digital goods are an exception to this rule. In fact, digital gift card purchases made from a Canadian device are 4 times likelier to be fraudulent compared to e-giftcard orders from an American IP address.
Sporting equipment is another industry where Canadian orders carry more risk. Canadians love their sports, and apparently they are willing to go the extra mile to obtain gear. The fraud rate in Canada for sports equipment is 3 times higher than in the US.
US-Canada Cross Border eCommerce
With the cultural similarities between Americans and Canadians, as well as the porous border between Canada and the US, it isn’t surprising that there is extensive cross-border eCommerce between the countries.
Retailers who are familiar with these legitimate shopping patterns stand to gain a lot of good business. For example, many US merchants offer customers free domestic shipping. To enjoy free shipping, Canadian consumers often provide a US shipping address belonging to friends or relatives who live across the border, and then drive over to pick up their goods. This shopping pattern is reflected in the data:
Virtually all online purchases, where the distance between the US shipping address and Canadian billing address is under 200 km (124 miles) are valid. Orders where the distance between the Canadian billing address and US shipping address surpasses 200 km carry a higher risk of fraud.
Delving deeper into our data, we compared Canadian orders shipping to US states close to the Canadian border vs. orders shipping to US states that aren’t along the border. As expected, there is less fraud in Canadian orders shipping to US border states:
Location is Everything in Fraud Too
Canada is the 2nd largest country in the world, and the US is 3rd. We analyzed our data to see how fraud patterns differ across the different states, provinces, and territories. In Canada, the safest territory is Prince Edward Island (PEI). In fact, we’ve never encountered fraud from PEI or from Yukon! Even Ontario, Canada’s most populated province, is pretty safe, with 98.8% of eCommerce orders being valid. Quebec has the highest rate of online fraud in Canada. Still, merchants can and should approve nearly 9 out of every 10 orders from this province:
In the US, online orders placed from Rhode Island and Hawaii are extremely safe. The US states with the highest rates of online fraud are Delaware and Florida. Nonetheless, merchants who want to avoid false declines should approve at least 95% of online purchases from these states:
Another interesting trend is the correlation between the billing-shipping distance and the rate of fraud. In both Canada and the US, the rate of fraud increases as the distance between the billing address and shipping address grows. This correlation is more pronounced in Canadian eCommerce orders – nearly 30% of orders with a shipping address that is 200km away (or more) from the billing address are fraudulent:
The Devil is in the Fine Details
Just like their national holidays (only three days apart), the differences between Americans and Canadians are probably less significant than some would like to admit. But for eCommerce merchants, every boost in approval rate translates into revenue, and every false decline means a lost deal and a lost lifetime value of the insulted customer.
The key to mastering fraud management lies in identifying the people behind the order and understanding the context of their purchases. Here’s wishing our American and Canadian friends happy and joyous independence days!