Mumbai: India is seeing a significant upswing in fraudulent activities resulting in an increase in fraud losses with financial services reporting the biggest increase.
A study conducted by Forrester Consulting, commissioned by Experian, a leading global information services provider, found that year-on-year fraud losses are increasing for nearly two-thirds (64 per cent) of respondents, with financial services organisations reporting the biggest increase in losses. There are several factors driving this surge in fraud attacks, such as persisting financial pressure on consumers, numerous data breaches leaking sensitive information onto the dark web, and the arrival of publicly accessible Generative AI – which has lowered the technical skills required to conduct fraud.
This concerning trend is compounded by the fact that 67 per cent of these respondents are currently grappling with the challenges of keeping pace with the rapidly evolving landscape of fraud threats.
The volume of fraud attacks has gone up in almost every category.
Synthetic identity attacks, where real and fake information are combined to form new identities, are on the rise, particularly in the financial services sector. This is closely followed by identity theft attacks and account takeover attacks. In the e-commerce sector,
friendly fraud attacks, where customers dispute legitimate charges, have grown the most for merchants, followed by synthetic identity attacks, found the study.
The survey gathered insight from 308 fraud managers in the financial services, telco, and eCommerce sectors across ten countries in the EMEA and APAC regions: India, Denmark, Germany, Australia, Italy, New Zealand, the Netherlands, South Africa, Spain, and Turkey.
“The study underscores that the future of effective fraud prevention lies in the realm of artificial intelligence (AI) and machine learning (ML) technologies.”
According to the study, the biggest challenge limiting businesses' ability to prevent fraud is a lack of device fingerprinting for fraud identification (62 per cent). A second is an increasing number of referrals, causing increased delays and costs (56 per cent).
Recognising the urgency, businesses emphasize the crucial role of device data in passive customer screening.
The top fraud-related priority is improving the explainability of ML models (65 per cent), which shows how important ML has become to fraud prevention. Transparent ML models allow for human oversight so that unintentional bias can be identified. This capability is essential to ensure ethical AI use and to comply with a future AI regulatory framework.
Nearly two-thirds (67 per cent) of businesses believe that the future of fraud prevention will be driven by AI/ML-powered solutions.
The main benefits of using ML fraud solutions are an increase in acceptance rates, reduced losses through greater fraud detection accuracy, and a decrease in the volume of manual reviews and false positives. This is critically important, considering that 73% of businesses find that false positives cost their business more than fraud losses.
“Unlike traditional methods, AI excels in swift adaptation and real-time analysis, actively defending against ever-changing threats.
Unlocking the power of data and machine learning, AI becomes a custodian at digital gateways, ensuring consumer protection and preventing substantial losses for businesses. It plays a pivotal role in fortifying security, and protecting businesses from significant financial risks, and building a robust credit ecosystem." says Manish Jain, Country Managing Director, Experian India.
Experian is the world’s leading global information services company.
