According to PwC’s 2018 Global Economic Crime and Fraud Survey, 61% of banks across the globe experienced an increased volume of external fraud in 2018, with 59% stating that the value of such fraud had risen. In Asia Pacific alone, online fraud losses have grown by 50% in the past year, and two-thirds of businesses have reported an increased concern about such losses*.
Asia Pacific’s retail payments landscape has changed significantly over recent years, and continues to do so as local governments focus on financial inclusion initiatives and market players try to find innovative ways to reach the underserved and unbanked – writes Igor V. Simonov, Associate VP, Business Development and Sales Manager at Compass Plus.
However, with both consumers and fraudsters adapting to new developments in technology, managing the changing risk of fraud has become a necessity for financial institutions across the region.
Online and mobile
Increasing smartphone and mobile internet penetration in the region, coupled with a younger demographic, has meant that consumers are more inclined to use their mobile devices to access their banking services and shop online. Not only is the e-commerce market growing significantly, with an estimated $1.6 trillion of e-commerce transactions carried out in the region in 2018**, in countries such as India, mobile banking payment transactions doubled in 2017 (from 977 million in 2016 to 1.87 billion), surpassing credit card usage for the first time***. With this kind of significant growth, it is not surprising that online and mobile fraud is seen as a particular concern for many financial institutions in the region.
Another channel that has FIs concerned is their ATM networks. Home to almost half of the world’s ATMs, financial inclusion initiatives have driven the deployment of ATMs across the region. For example, in some countries, regulations state that IADs must participate in these initiatives to ensure that banking services are available to underserved communities, while, in others, FIs are required to have at least one ATM in each bank branch. FIs are also being encouraged to deploy ATMs in rural communities and have developed additional product and service offerings to support customers in such communities.
Tackling fraud efficiently
The introduction of new technologies in any region delivers significant challenges to FIs in terms of fighting fraud, and the evolution of the payments landscape in Asia Pacific is no different. While these services have opened up much wider access to financial services, as customers no longer have to visit branches within set time periods to access them, the shift to online and mobile, e-commerce and new ATM services, presents a huge opportunity for criminals looking to capitalise on vulnerabilities in the system.
As such, FIs are much more susceptible to a huge variety of attacks through the numerous channels they offer customers. While there is no sure-fire way to protect against such attacks, it is clear that there can be no single line of defence against fraud. Instead, FIs require multiple layers of protection, detection and prevention across multiple channels to ensure the best defence possible and reduce the risks faced by them.
Safeguarding a customer’s account details, through dynamic or one-time passwords and biometrics, implementing 3D secure transactions or offering virtual cards for customers who choose to shop online, alerting customers to potential fraudulent attacks via notifications or setting limits that can be controlled by both the customer or FI, as well as utilising intelligent data analysis to detect and prevent fraud can all be effective ways of reducing the risks to the customer and FI.
With fraudsters changing tact constantly, FIs need tools that that quickly respond to new fraud schemes, ensuring early online detection and the prevention of potentially fraudulent transactions with statistical post-authorisation analysis of the activity of customers, terminals and other objects.
The cost of fraud is not simply financial loss. Financial institutions have to bear a number of hidden costs, including loss of customer confidence and damage to their brand and integrity. Therefore, it is important for financial institutions to take a close look at their fraud strategies to not only ensure that customers still receive an excellent and seamless experience, but that their fraud detection and prevention is both accurate and efficient. With nearly three-quarters of financial institutions in the region anticipating that fraud attacks will grow in their country in 2019 (according to FICO), it is more important than ever that they have the correct detection and prevention procedures in place.
*2019 Experian Identity and Fraud Report. Asia-Pacific Edition
**GlobalData’s Ecommerce Landscape in Asia-Pacific: Drivers, Market Players, and Telcos’ Role
***The Asian Banker
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