Based on a 2022 fraud survey, one insurer is urging financial institutions to bolster their 2023 fraud prevention, risk management capabilities
In a survey conducted with 250 respondents from financial institutions across seven Asian markets including China, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam on digital fraud trends in 2022, it has been concluded that Asia’s top financial institutions continued to be challenged by the expanding threat landscape in the past few years amid ever-tightening regulatory and enforcement measures.
More rigorous supervision and penalties in the FI industry had resulted in increased monetary losses in the form of regulatory fines, the highest-ranking component of fraud loss for 41% of FIs—a change from a similar survey in 2020 where direct fraud losses had been ranked highest.
The survey data showed found that Asian FIs completed a higher number of transactions through mobile and online channels, with the highest digital channel adoption at the time seen in Indonesia (71%), closely followed by Malaysia (70%). Respondents indicated they expected the average daily digital transaction volume to surge by 70% by 2025 compared to 2022.
As more FIs expanded their digital offerings in response to consumer behavior shifts towards mobile and digital, managing the cost of increasing compliance had emerged as a key concern for 70% of FIs, while the ability to scale fraud detection measures to growing digital transaction volumes (39%) and identity verification (33%) also ranked as top challenges. Also:
- Indonesia and Thailand respondents indicated strong machine learning adoption, at 71% and 69% respectively.
- Third-party data was used more actively in China (77%), Vietnam (73%) and the Philippines (68%) alongside robotic analytics in Singapore (63%) and Malaysia (62%) to address false positives.
- 47% of FIs in the survey actively used ML tools and 37% were beginning to use them. One of the biggest challenges for respondent’s firms undergoing digitalization was the increased complexities in addressing data standardization and governance to scale fraud detection.
- 38% of respondents indicated that inadequate data standardization was their most critical gap, alongside 32% who were challenged by fragmented data because of piecemeal systems and software. In Thailand and China, fragmented data emerged as the top challenge. In Malaysia, after inadequate data standardization, lack of good link analysis was also highlighted by 23% of respondents as the top challenge. Meanwhile, 59% of respondents indicated increasingly reliance on third-party data, alongside 58% that used ML to address false positives.
- 78 per cent of respondents were using data from interconnected devices, while 76% used transaction data, and 64% used public data. Also, 42% of FI respondents in the survey indicated their need to prioritize and invest in one platform to interexchange application data and transaction data in 2022, while 47% envisaged adding internal unstructured data and geographic data to deepen fraud detection capabilities in 2023.
According to Bernardi Susastyo, General Manager (Asia), GBG, which commissioned the survey: “The increased need to deepen threat detection, analysis and timely prevention capability requires a more strategic and structured approach that takes into account proactive multi-pronged data and technology initiatives, alongside robust identity verification and authentication tools. In 2023, FIs would do well to address risk management holistically to ensure the initiatives they integrate data across their organizations and the ecosystem, so that even as they improve their fraud prevention and risk management capabilities, they are not compromising customer experiences.”