Payments operator Visa says its AI-driven security has helped financial institutions prevent Australian businesses being defrauded to the tune of $354 million in the past year.
Verifying Identity and Determining Transaction Origination are Common Challenges Across Australia, Hong Kong, Japan and India
GUEST RESEARCH: LexisNexis® Risk Solutions today released its 2021 True Cost of Fraud™ APAC Study covering the retail, ecommerce, financial services and lending sectors for Australia, Hong Kong, India and Japan. The study provides a snapshot of fraud trends in the Asia Pacific (APAC) region during the pandemic and spotlights key pain points for firms in relation to navigating new payment mechanisms, transacting through online and mobile channels and expanding internationally.
The cost of fraud for retail, ecommerce and financial institutions in the surveyed markets is high. The LexisNexis Fraud Multiplier™ – the total amount of loss a firm occurs based on the actual U.S. dollar value of a fraudulent transaction – shows the cost per transaction is $3.51 in Australia; $3.61 in Hong Kong, $3.87 in Japan and $3.84 in India. All four countries reported higher costs per transaction than the regional 2019 average that involved other APAC markets at $3.40.
A combination of factors is driving the high cost of fraud, including market events influencing the use of transaction channels/payment methods, the challenges that businesses face when assessing fraud with these transactions and the less than optimal approach that businesses take towards fraud detection, prevention and minimizing customer friction.
The report’s findings stem from a comprehensive survey of 418 risk and fraud executives in retail, ecommerce, financial services and lending companies in the APAC region in 2021.
Key findings from the LexisNexis Risk Solutions True Cost of Fraud APAC Report:
• Financial Institutions Tend to Have Higher Costs – Given the heavy account-based nature of their business and the need to repay fraud losses to customer accounts, financial institutions often employ more internal and external labor for investigation, detection and recovery. On average they spend $3.78 per transaction in Australia, $4.70 in Hong Kong, $4.46 in Japan and $4.76 in India.
• The Effect of the Pandemic – The pandemic has presented the same challenges to the Australian, Hong Kong, Japanese and Indian markets such as shutdowns, fear of in-person contact and fear of transmission, though the disruption was not equal. Each market saw a marked increase in the use of digital transactions and digital payment methods while cash and in-person payments dropped. However, Hong Kong and India changed more fundamentally as these markets have traditionally had more in-person and cash-driven transactions. Businesses in both markets needed to adapt quickly and many were unprepared from a fraud detection standpoint.
• Identity Verification Remains a Top Challenge – Common online and mobile channel challenges across markets included identity verification and determining transaction origination. The rise of synthetic identities was the most common source of identity verification issues. Ecommerce merchants indicated that transaction origination is more commonly cited as a challenge due to their limited use of solutions to capture device ID and geolocation. The rise of mobile and digital wallets as well as other contactless payment methods has created difficulty for many ecommerce merchants when assessing fraud risk related to these channels.
• Limited Use of Best-Practice Fraud Detection/Mitigation Approach – The use of digital/passive identity authentication solutions and transaction risk assessment solutions was limited in the Australia and Hong Kong markets. The number of organizations that integrated cybersecurity and/or digital customer experience with fraud operations was also limited in both markets. The ecommerce sector for the Hong Kong market is an outlier as it is fairly nascent and still in a development stage. This is primarily because Hong Kong, a highly developed territory, has enabled easy access to area businesses and in-person transactions have been much more common than those made online.
Cameron Church, director of fraud and identity, LexisNexis Risk Solutions, said, “As fraudsters become more sophisticated and their methods more complex, businesses need a robust fraud and security technology platform that helps them adapt to a changing environment, offering strong fraud management while maintaining a low-friction customer experience. A successful fraud detection and prevention approach involves an integration of technology, cybersecurity and digital experience programs to address unique risks from different transaction channels and payment methods.
“High fraud costs impact ecommerce merchants, retailers and financial institutions as they increase each year – even without the influence of COVID-19,” continued Church. “With sophisticated threats on the rise, taking a multi-layered solution approach has proven to be the most effective way to fight fraud across various channels and transaction types, as well as performing a more complete assessment that combines physical and digital identity data analysis. Using different solutions to support fraud detection at various points throughout the customer journey will strengthen a firm’s overall defense.”
About LexisNexis Risk Solutions LexisNexis Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information and analytics for professional and business customers. For more information, please visit www.risk.lexisnexis.com and www.relx.com.
Real estate auction platform, Gavl, has launched new features on its app, including bidder registration, identity verification, contract signing and deposit payment, which it says gives real estate agents the ability to enable their buyers and vendors to complete an entire auction transaction digitally and remotely.
High levels of fraud in the Asia Pacific region are expected to increase further, according to a new study across 10 regional markets, including Australia, which found that 1 in 5 people have encountered fraud directly, while 1 in 3 people or their loved ones have been affected.
CSC has unveiled for the first time in Australia and New Zealand a self-serve digital insurance claims solution from UK-based digital insurance solutions provider 360Globalnet.
Australia’s chief financial officers expect there will be an increasing need for digital investment within the finance function, with the top three areas for investment to be data analysis, compliance and regulation and fraud detection/risk management.
The chickens look like they are coming home to roost in 2015 for those businesses and organisations which have invested their money in Big Data technologies.
Global US-based cybercrime protection firm Threatmetrix has released its latest Fall 2014 Release with a host of new and upgraded enterprise-class security solutions, turning things up past 11… to 12!
CA Technologies has released its next generation Risk Analytics solution which it says will allow card issuers to reduce incidents of fraud and gain ‘unprecedented’ flexibility and control with their fraud detection systems.
I guess we can safely assume they're mining and selling our personal data to others.It's your ABC, but not your[…]
I agree. Not much new in these devices these days, but there is a big market out there for the[…]
Copying Samsung, which also has a A3x, A5x, A7x, A9x line up at similar price points.
Has Jennifer put the Dud in Dudley-Nicholson?
The problem lies with so-called pundits who are trying to push a particular line and do not bother to verify[…]