Kolkata: Almost three in four banks in Asia Pacific anticipate that fraud in their country will increase in 2019, according to a recent poll by FICO, the Silicon Valley-based NYSE-listed company, which is a pioneer in the use of predictive analytics and data science to improve operational decisions, holding more than 195 US and foreign patents. Of specific concern are transactions completed when neither the card nor the cardholder is physically present (card-not-present or CNP fraud), as well as cards taken out by criminals under false identities (application fraud). These were identified as the two key concerns, as well as the biggest fraud challenges faced by banks in 2019.
Interestingly, when it comes to India, in particular, a separate study by another NYSE-listed company-FIS suggested that financial fraud has grown substantially since last year, with the share of victims doubling to 37 per cent of respondents, and all age segments falling victim to fraudsters. Age group of 27 to 37 has been most impacted by financial fraud than other age groups. FIS is a global leader in financial services technology, with a focus on retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions.
FIS' fifth annual PACE report highlights that Indians have embraced digital transactions, but they are yet to learn the do's and don'ts of sharing personal information, as social engineering and phishing emails are rampant. There is a dramatic correlation in India between booming adoption of mobile apps, digital payments and increasing rate of financial fraud. 96 per cent of Indian consumers who were victimized by financial fraud during the last year had switched to a mobile app and digital payments, from cash as mode of payment, significantly impacts country's efforts towards financial integration.
"In the current digital banking landscape, it is imperative that the banks enhance investments in security, fraud prevention and customer education. Just as importantly, it can also enhance trustworthiness, which is currently consumers' top priority while banking. Customers' trust in their banks is not just a feeling or an emotion but an objective decision based on a number of expectations. However, banks can earn customers' trust if they focus on safe and secure transactions, fraud prevention and privacy of personal information," said Ramaswamy Venkatachalam, Managing Director, FIS, India.
The overall scenario in the APAC is nothing to write home about either. Dan McConaghy, president of FICO in Asia Pacific, on his parts, said that the volume and velocity of transactions is growing in Asia. Over 50 per cent of global online retail sales in 2018 originated from the region. This growth in e-commerce along with the efforts of banks to digitize more services has seen a change in fraud risk. Dealing with an ocean of transactions means that AI and machine learning are essential when it comes to detecting fraud.
The FICO survey found that efforts to keep up with changing fraud patterns remain mixed. Most APAC banks surveyed continue to take a precautionary approach to stopping fraud. More than 50 per cent of APAC banks continue to simply block cards on the first fraud alert, a rate that remains unchanged from the 2017 survey. In contrast, 6 per cent will keep the card open while trying to confirm fraud with the customer. Positively, this number has doubled since the same question was asked in the previous poll.